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capital gain

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › capital gain

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by Tax Tutor.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 1, 2016 at 7:58 am #302654
    jingdong
    Participant
    • Topics: 89
    • Replies: 115
    • ☆☆☆

    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

    March 1, 2016 at 4:48 pm #302865
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    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

    March 1, 2016 at 6:11 pm #302897
    jingdong
    Participant
    • Topics: 89
    • Replies: 115
    • ☆☆☆

    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

    March 2, 2016 at 12:18 pm #303006
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    As I have stated above the lower limit should be £150,000! £375,000 is clearly not the lower limit!

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