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I am confused about the answer to Open Tuition example 8 in chap 23 – partial gift relief – is it incorrect? Taking the actual cost of shares from their market value and then restricting the gift relief by the amount of consideration received.
I was doing another question, Q24 in BPP revision kit/ Dec 2009 exam. That answer states that you take the actual cost from the actual proceeds and that amount is the gain.
I just want to know if this is an error in Open Tuition notes.
Thanks
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The example in the open tuition notes are correct. Q24 in BPP I’m assuming you are referring to point 1 for Nim and the gift he makes to his daughter. This does not qualify for gift relief as Nim owned less than 5% of the shareholding so is not a business asset. Read chapter 15 section 3.2 ‘qualifying assets’
No. I did not mean Q24. It is question 25 in BPP – Amanda, Bo and Charles. Bo Neptune made a gift. It is only eligible for partial gift relief. In comparison to Open Tuition notes – the difference is the treatment for the partial gift relief.
Actual proceeds $160 000
Cost – ($94 000)
Chargeable gain $66 000Open Tuition says take the cost from the market value and not the actual proceeds.
PLEASE HELP ME UNDERSTAND. I did it open tuition way and the answer was incorrect compared to the answer in BPP Revision kit pg 120. I checked the answer for the Dec 2009 exam is the same.
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partial gift relief is quite straight forward. This is the way I do it
Market value X
less Cost (Y)
= gain Z
then consider if there is an immediate gain that is chargeable i.e. (amount paid less cost) if this amount is more then Z this means no gift relief applicable. if the amount is less than the gain, then subtract and this will give you the gift relief amount.so in the example if everything was gifted and son has not paid anything then the gain of £116,000 would be the whole gift. However the son has paid Bo £160,000. so we need to work out the immediate charge (160000-94000) =£66000.
As £66000 is less than £116000 then you subtract the amounts and this will give you amount of gift relief. (116000-66000= £50000)
Hope that helps
I’ve just checked, and the answer in the open tuition notes are correct, and it appears to follow the same workings as shown in the BPP revision kit. I think the problem lies in the confusing way in which the answer is presented in the BPP book. Here’s the answer to both questions, following the same format. Hopefully this might make it clearer.
Example 8 from open tuition
Proceeds (market value) 200,000
Cost (60,000)
Gain 140,000
Deferred Gain (85,000 – 60,000) (25,000)
Revised Gain 115,000Bo Neptune (second part of question)
Proceeds (market value) 210,000
Cost (94,000)
Gain 116,000
Deferred Gain (160,000 – 94,000) (66,000)
Revised Gain 50,000
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