Zoyla’s capital gains tax (CGT) liability for the tax year 2018-19 is calculated as follows
Ordinary shares in Minor Ltd 98,400
Ordinary shares in Major plc 44,100
Annual exempt amount (11700)
130800
CGT: 10,600 at 10% 1060
120,200 at 20% 24040
25100
Minor Ltd is an unquoted trading company with an issued share capital of 200,000 £1 ordinary shares. Zoyla has been a director of this company since 1 April 2012.
On 20 June 2018, Zoyla sold 20,000 of her holding of 45,000 ordinary shares in Minor Ltd. She had originally purchased 22,500 shares on 15 August 2017 for £117,000.
On 12 December 2017, Minor Ltd made a 1 for 1 rights issue. Zoyla took up her allocation under the rights issue in full, paying £7.40 for each new share issued.
Major plc is a quoted trading company with an issued share capital of 2,000,000 £1 ordinary shares. Zoyla has been an employee of Major plc since 1 November 2017 when she acquired 16,000 ordinary shares in the company.
On 6 March 2019, Zoyla sold her entire holding of ordinary shares in Major plc to her son for £152,000. On that date, shares in Major plc were quoted on the stock exchange at £9.62 – £9.74
Zoyla will not make any other disposals in the foreseeable future, and her taxable income will remain unchanged.
Assuming that the tax rates and allowances for the tax year 2018-19 continue to apply, how much CGT would Zoyla have saved if she had delayed the sale of her 16,000 ordinary shares in Major plc until the following tax year?
Sir here correct ans is 3400.
If here if we do not do working at margin calculation and instead do full calculation, so can you please help me that how we will reach to the correct answer through full calculation,so my concept could be clear
Ask the Tutor ACCA TX-UK
Zoyla MTQ
I assume that the answer gave you the calculations behind the 3,400?
Currently the gains on Minor plc are being taxed at 20% - therefore 44,100 at 20% =8,820
If the disposal is delayed until the next tax year the gains are reduced by the available AEA of 11,700 to give taxable gains of 32,400
These gains are then taxed as:
10,600 at 10% = 1,060
21,800 at 20% = 4,360
Total = 5,420
Saving = 8,820 - 5,420 = 3,400
I assume the answer showed the savings as being:
11,700 (AEA) at 20% (gains not now taxed) = 2,340
10,600 x (20% - 10%) (gains taxed at 10% instead of 20%)= 1,060
Saving = 3,400
Ok sir thanks. And sir here if suppose question ask that how much holding zoyla had in minor ltd
So we will say 45000/200000 = 22.5% OR we will say 22500/200000 = 11.25%?
For what purpose would you need to know the % shareholding?
For entreprenuer relief
Good - that's the answer I was hoping you would give! It is the % shareholding prior to the disposal - so here 22.5% - but why then there is no entrepreneurs' relief?
Because she does not have last 1 year ownership at the time of sale therefore does not qualify for ER.
Correct - well done - keep up the good work!
@Taxtutor said: I assume that the answer gave you the calculations behind the 3,400? Currently the gains on Minor plc are being taxed at 20% - therefore 44,100 at 20% =8,820 If the disposal is delayed until the next tax year the gains are reduced by the available AEA of 11,700 to give taxable gains of 32,400 These gains are then taxed as: 10,600 at 10% = 1,060 21,800 at 20% = 4,360 Total = 5,420 Saving = 8,820 - 5,420 = 3,400 I assume the answer showed the savings as being: 11,700 (AEA) at 20% (gains not now taxed) = 2,340 10,600 x (20% - 10%) (gains taxed at 10% instead of 20%)= 1,060 Saving = 3,400I am also having a confusion here. How that 10600 figure came when we calculated 10600 at 10% from 32400 after AEA figure?
The 10,600 is given in the question where it shows the CGT calculation - this must be the available basic rate band - and the question also says that the taxable income will remain unchanged for the following tax year
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