- August 28, 2021 at 12:51 am #633179maddi93Member
- Topics: 5
- Replies: 5
Please could you help me with the below question?
In October 2009 Hitesh sold a factory for £230,574 and realised a gain of £31,083.
In May 2010 he bought a warehouse for £231,211. He then sold the warehouse in Dec 2020 for £270,213.
Both of the buildings were used for the purpose of his sole trade business. What is the chargeable gain arising on the disposal of the warehouse in Dec 2020 assuming all the available reliefs are claimed?
Sale of warehouse
Sale proceeds 270,213
Less: Cost 231,211
Less: ROR (31,083)
Chargeable gain: 70,085
In the Kaplan exam kit, the cost amount is a positive figure whilst the roll over relief is a minus. Shouldn’t they both be a minus figure?August 30, 2021 at 11:40 am #633508Tax TutorMember
- Topics: 2
- Replies: 3965
The allowable cost of the warehouse is reduced by the rollover relief given on the sale of the factory – this reduced cost is then correctly deducted from the sale proceeds to to compute the gain on the warehouse.
Stop thinking about these figures as being positive or minus and creating confusion for yourself and instead understand what the rollover relief does – it defers a gain by reducing the cost of the newly acquired asset – that lower cost will then be used to compute a larger gain on the sale of that asset.
Have you watched the OT lectures and used them in conjunction with the Study Notes?
- You must be logged in to reply to this topic.