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Question:
Apple Ltd owns 100% of the ordinary share capital of Banana Ltd. The results of each company for the year ended 31 March 2020 are:Apple Ltd: TATP=(125000), Chargeable Gains=180000, QCD=(40000)
Banana Ltd: TATP=650000, Chargeable loss=(8000)
Apple Ltd’s chargeable gain arose from the sale of a freehold warehouse on 15 April 2019 for 418000. Banana Ltd purchased a freehold office building for 370000 on 10 January 2020.
Assuming that reliefs are claimed in the most beneficial way, calculate corporation tax liabilities of Apple Ltd and Banana Ltd.
Doubt:
Sir, the said sum is from Kaplan study kit and in the solution they’ve considered only rollover relief (48000-8000) 40000 under Apple Ltd’s chargeable gains. I don’t understand why 180000 has been ignored. Kindly explain.
Apologies for the lengthy question.
Thank you!The 180,000 has not been ignored – group rollover relief would have been claimed to reduce this gain but as 48,000 of the sale proceeds have not been reinvested, this amount of the gain remains chargeable after rollover relief. This chargeable gain is then reduced by the 8,000 capital loss by electing to deem the loss made by Banana to have been made by Apple
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