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Delroy and Grant

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Delroy and Grant

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by faiz9345.
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  • August 31, 2021 at 11:48 am #633646
    faiz9345
    Member
    • Topics: 7
    • Replies: 4
    • ☆

    On 10 January 2021, Delroy made a gift of 25,000 £1 ordinary shares in Dub Ltd, an unquoted trading company, to his son, Grant. The market value of the shares on that date was £240,000.
    Delroy had subscribed for the 25,000 shares in Dub Ltd at par on 1 July 2006.
    Delroy and Grant have elected to hold over the gain as a gift of a business asset.

    Grant sold the 25,000 shares in Dub Ltd on 18 March 2021 for £240,000. Dub Ltd has a share capital of 100,000 £1 ordinary shares. Delroy was the sales director of the company from its incorporation on 1 July 2006 until 10 January 2021.

    Grant has never been an employee or a director of Dub Ltd.
    For the tax year 2020-21, Delroy and Grant are both higher rate taxpayers.
    They have each made other disposals of assets during the tax year 2020-21, and therefore they have both already utilised their annual exempt amount for this year.

    What is Grant’s capital gains tax (CGT) liability for the tax year 2020-21 in respect of the disposal of the shares in Dub Ltd?

    hi sir,

    i have a doubt in this question.
    the answer given for this question is this ( 215,000 (240,000 – 25,000) at 20% = £43,000)
    i am not sure if GRANT qualifies for gift relief.
    and if he does how will we calculate his base cost according to the answer given ?

    would appreciate if you could help in this question
    thank you

    September 1, 2021 at 9:19 am #633774
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    Grant has sold the shares for the full OMV of 240,000 – there is no gift and therefore no gift relief on his sale.
    Delroy did qualify for gift relief on the gift to Grant – as given in the question – thus deferring his gain of 215,000 (240,000 – 25,000) and creating a base cost of those shares to Grant of 25,000

    September 1, 2021 at 10:17 am #633781
    faiz9345
    Member
    • Topics: 7
    • Replies: 4
    • ☆

    Thank you sir for replying back

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