During the year ended 5 April 2021 Eric (a higher rate taxpayer) disposed of the following asset:

(i) A small cottage in Devon which he had inherited in August 1988 when its value was £20,000 and he subsequently used as a holiday cottage for his own use. In September 1989 he had added a conservatory to the property at a cost of £3,500. Eric did not use the cottage as his main residence at any stage, and he sold it for £225,000 in July 2020. Eric incurred legal and estate agent’s fees of £1,500 on the disposal of the property.

(ii) A vacant 8 hectare plot of land for £52,800 in February 2021. The plot was part of a 12 hectare plot originally bought by Eric for £31,700 in October 1988 and not used by him as a business asset nor is it associated with a residential property. Incidental costs of disposal were £1,300. The remaining 4 hectare plot was valued at £22,000 in February 2021.

(iii) Eric sold a motor car for £16,400. The car was purchased in January 2012 for £17,800

(iv) Eric sold an antique vase for £8,500. The antique vase had been purchased in January 2014, for £4,100

(v) Gilt-edged securities with a disposal value of £12,000 were sold in June 2020.The original cost of these securities were £10,000.

Required:

1. (a) Compute Eric’s capital gain tax liability for the tax year 2020/21 and advise him by when the tax is payable. Assume that Eric is a higher rate taxpayer

2. (b) Explain the effect of being ‘connected’ for capital gain tax purpose with examples.

Answer rating: 100% (QA)

Answer a Capital Gain tax SrNo Particulars Sale value Cost of selling Net Cost ... View the full answer