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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:
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. If anyone could explain this to me, it’ll be great.
Apologies for the lengthy question.
Thank you!Apple Ltd and Banana Ltd are in a gains group. Therefore, for the purpose of rollover relief they are considered as one company. The proceeds received are 418000 and amount reinvested are only 370000, therefore 48000 has not been reinvested, it becomes chargeable now and the remaining is rolled over.
Therefore Apple Ltd’s chargeable gain is 48000 and it can take up the loss of (8000) of Banana Ltd. Thus net chargeable gain of Apple Ltd is 40000.
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