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Can you please explain how to calculate the deferred gain in this question. Please explain why they considered the interest in the calculation. Thanks.
Q.) On 4 May 2020, Fogo Ltd sold a freehold warehouse which it had used exclusively in ts trade. The warehouse was sold to an unconnected company for £560000. It had cost Fogo Ltd £100000 when it was acquired in September 2001.
Interest Payable – On 1 October 2019, Netta Ltd borrowed £1000000 from a bank at an annual interest rate of 5%. During the year ended 30 September 2020, the interest payable of £50000 was in respect of the following:
1.) Interest on £550000 on the loan to acquire fixed pant & machinery for the use in its factory. The fixed plant & machinery has an expected useful life of 15 years.
2.) Interest on £450000 of the loan to acquire a 3% shareholding in a trading company called Jona Ltd.
The question is:
Calculate the amount of the gain which can be deferred if a claim for group ROR is made and explain when the deferred gain will become chargeable.
The amount that can be defered is proceeds minus cost
The gain is chargeable when the second asset is sold, or if the asset is intangible then the earlier of – 10 years, when it is sold or when it ceases to be used in the business
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