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Chapter 19 – Example 4

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Chapter 19 – Example 4

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Tax Tutor.
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  • June 2, 2021 at 6:58 am #622718
    mattytindall
    • Topics: 2
    • Replies: 0
    • ☆

    In previous examples of calculating the indexation allowance, it was taken as the indexed cost less the original cost e.g example 3 has indexation allowance of £9,955 – £5,000, however, in the answer to example 4 you have deducted the original cost and the indexed cost from the proceeds to arrive at a chargeable gain of £9,107, should this not be:
    Proceeds £15,000
    Less allowable cost (£2,500)
    Unindexed gain £12,500
    Indexation allowance (£3,393 – £2500) (£893)
    Chargeable gain £11,607

    June 4, 2021 at 12:28 pm #623100
    Tax Tutor
    • Topics: 2
    • Replies: 3929
    • ☆☆☆☆☆

    As it says in the notes and in the lecture and is shown in the answer you can indeed split the calculation into a deduction of the cost and then a separate calculation of the IA on the share pool – the problem in your calculation is that your IA has not been correctly calculated – the indexation factor to December 2017 is 1.357 – I think you have used 0.357

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