Dear Tutor, would you please help me shown as follows:
Gastron Ltd is a manufacturing company . in the year to 31 March 2015 Gastron Ltd had taxable total profits of £ 600,000 and augmented profits of £ 640,000. The taxable total profits included a chargeable gain of £ 74,800 on the sale of 1% shareholding. This figure is after taking account of indexation.
Gastron Ltd owns 100% of the ordinary share capital of Culinary Ltd. On 13 February 2015 Culinary Ltd sold a freehold factory and this resulted in a capital loss of £ 66,000. For the year ended 31 March 2015 Culinary Ltd made no other disposals and paid corporation tax at the small profits rate of 20%.
Explain why it would be beneficial for Gastron Ltd and Culinary Ltd to make a joint election to transfer the whole of the capital gain on Gastron Ltd's disposal of shares to Culinary Ltd.
the answer is that Gastron Ltd is a marginal rate company since its augmented profits fall between the lower limit of £ 750,000/2=£375000 and the upper limit of £1500,000/2=750,000.......
my question is where the number 750,000 came from, it should be 300,000, would you please explain to me.
many thanks
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capital gain
From what you have written there are 2 associated companies and we are dealing with a 12 month accounting period so the upper and lower profit limits should be divided by 2, giving 750,000 and 150,000 respectively
sorry i didn't say clearly, i ask specificly that lower limit £ 750,000/2=375,000 , why they use 750,000, not using 300,000.
many thanks
As I have stated above the lower limit should be £150,000! £375,000 is clearly not the lower limit!
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