Compute the chargeable gains arising from Karen’s two disposals.

1. In 2017-18, Ahmed has capital gains of ₤125,000 and allowable losses of ₤28,000. He also has capital losses brought forward of ₤4,800.

Ahmed’s taxable income for 2017-18 (after deduction of the personal allowance) is ₤18,600. He makes no Gift Aid donations during the year. Compute his capital gains tax (CGT) liability for the year assuming his gains of ₤125,000 comprise either:

1. a gain of ₤115,000 which qualifies for entrepreneurs’ relief (ER) and a non-ER gain of ₤10,000 on the disposal of chattels, or
2. An ER gain of ₤10,000 and a non-ER gain of ₤115,000 arising on the disposal of residential property, or
3. An ER gain of ₤7,500, a non-ER gain of ₤75,000 on the disposal of residential property, and a non-ER gain of ₤42,500 on the disposal of shares.

2. Karen bought a house in 1990 for ₤46,000. In November 1991 she spent ₤18,000 on dividing the house into two self-contained flats. In September 2015 she sold one of the flats for ₤90,000, at which time the other flat was valued at ₤110,000. In January 2018 she sold the second flat for ₤115,000. Karen has never lived in either of the flats.

Compute the chargeable gains arising on Karen’s two disposals.

 

Answer rating: 100% (QA)

The chargeable gains arising from Karens two disposals are as fo... View the full answer