F6 – Taxation (UK)

Question D1
Anis purchased a building on 15th June 2001 at a cost of £135,000. He sold the
building on 31st May 2008 for £333,000. He had paid £1,000 to lawyer for making
the sale document, and £2,000 for giving an advertisement in a local newspaper for
selling the property.

a) Calculate his capital gains tax for 08/09?

b) How will your calculation differ, if he had made the sale one month earlier?

Annual Exemption 08/09: £9,600

Capital Gains Tax Rate: 18%

Question D2
Fahad, aged 67, purchased a building in August 2002 at a cost of £90,000. He sold it
in September 2008 for £410,000. He had spent £25,000 in June 2006 for making
improvements in the building.

Fahad is employed by Flick n Flack plc at annual salary of £24,000. He is provided a

company maintained petrol car costing £18,000 with official CO2 emission of 173
g/km and fuel for personal use. He drove the car for 14,000 miles during the year, of
which 30% were for personal purpose. Flick n Flack plc had incurred expenses of
£3,750 on provision of car, and £4,515 for fuel during the year.

In 08/09, he received interest from bank of £1,600 (net), dividends from a UK

company of £2,700 (net), and had paid personal pension of £4,212 (net). Calculate
his income tax and capital gains tax liability for 08/09.

Age related personal allowance:

Age 65 or over before 5 April 2008 = £9,030
Age 75 or over before 5 April 2008 = £9,180

Question D3 (part disposal)

Maryam purchased a building (comprising of ground floor and first floor) for
£120,000 in August 2002. She sold the first floor for £104,000 in February 2009.
Market value of ground floor was £156,000 on that date. Calculate her capital gains
tax for 08/09.

Question D4 (part disposal)

Zahid purchased 20 acres of land for £90,000 in March 2001. He sold 15 acres of
Land for £192,000 in September 2007. Market value of the remaining 5 acres was
£128,000 on that date. In July 2008, he sold the rest of the 5 acres for £180,000.
Calculate his capital gains tax for 08/09.

Question D5 (chattels)
Babar sold a painting in October 2008 for a sum of £8,400. He had bought the
painting in 1999 at a cost of £4,100. Calculate capital gains tax for 08/09.

Question D6
Asma bought a pair of vases for £3,000 in November 2003. She sold one vase in
April 2007 for £5,400, when market value of the other vase was £6,600. She sold
the second vase in June 2008 for £8,700. Calculate capital gains on both
transactions.

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F6 – Taxation (UK)

Question D7 (matching principle) Matching Principle:

Mansoor had bought the following shares in ABC plc: 1. Same day purchases
2,000 shares bought on 15.9.99 for £4,000 2. Following 30 day
1,250 shares bought on 27.3.02 for £4,500 purchases
1,750 shares bought on 31.1.05 for 6,500 3. Shares in the Pool
2,500 shares bought on 12.10.08 for £15,000
500 shares bought on 29.10.08 for £3,500

Mansoor sold 5,000 shares for £37,500 on 12 October 2008. Calculate his capital
gains tax for 08/09.

Question D8 (bonus / right issue)

Ali had the following transactions in the shares of ABC plc:
3,000 shares bought on 27.3.01 for £4,500
1 for 5 Bonus issue on 15.8.03
5,000 shares bought on 12.10.04 for £15,000
1 for 4 Right issue at £4 per share on 31.12.05

He sold 10,000 shares for £100,000 on 15 January 2009. Calculate his capital gains
for 08/09.

Question D9 (re-organization / acquisition)

Fahad sold 10,000 shares of Jupiter Limited (quoted company) for £90,000 on 31st
December 2008.

He had purchased 20,000 shares in Earth Limited (quoted company) in August 2001
at a cost of £5 per share. In December 2003, Jupiter Limited acquired Earth Limited
and gave all of the Earth Limited shareholders 2 ordinary and 1 preference share of
Jupiter Limited, against each of their original share in Earth Limited. Jupiter Limited's
ordinary shares were trading at £5, while preference shares were trading at £4 on in
December 2003. Calculate Fahad's capital gains for 08/09.

Question D10 (capital losses)

John made chargeable gains in the tax year 2008-09. His gains (before taper relief)
were:
£12,000 in respect of a non-business asset owned for five complete years
£3,000 in respect of a non-business asset owned for four complete years

John also made an allowable capital loss of £5,000 on the sale of a third asset in the
tax year 2008-09. John's taxable income (after his personal allowance) for income
tax purposes was £28,500 for the tax year 2008-09. Calculate his Income Tax
Liability and Capital Gains Tax Liability for 08/09.

Question D11 (capital losses)

George made chargeable gains in the tax year 2008-09. His gains (before taper
relief) were:
£10,000 in respect of an asset owned for seven complete years
£12,000 in respect of an asset owned for three complete years

John also made an allowable capital loss of £13,500 on the sale of a third asset in
the tax year 2008-09. Calculate his Capital Gains Tax for 08/09.

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F6 – Taxation (UK)

Question D12 (capital losses)

Simon made chargeable gains in the tax year 2008-09. His gains (before taper relief)
were:
£10,000 in respect of an asset owned for seven complete years
£12,000 in respect of an asset owned for three complete years

Simon had allowable capital loss of £15,500 brought forward from the year 2007-08.
Calculate his Capital Gains Tax for 08/09.

Question D13 (Gift Relief)

a) Ahmed gave his shop, which was being used in business for the last three years,
to his son Majid in June 2009 as a gift. The shop was valued at £95,500 on the
day of gift. Ahmed had originally purchased it at a cost of £45,000 in December
2001. Calculate Capital Gains for Ahmed.

b) Majid sold the shop in January 2009 for £110,000. Calculate his Capital Gains.

Question D14 (Gift Relief)

Faisal gave 10,000 ordinary shares in Flick plc to his son in September 2008 as a
gift. He had purchased 15,000 shares in the company in June 2000 for £3.5 each.
The shares were quoted on the day of gift at closing price of 670-686 pence per
share and bargains of 664-692 pence. Calculate capital gains for Faisal for 08/09
considering that he shares are business assets and he claims all available reliefs.

Question D15
Maryam gave a vase valued at £8,400 to her sister in July 2008 as a birthday gift.
She had purchased a pair of two vases from Shanghai when she was posted in China
in the year 2002 for £3,200. A dealer of oriental pottery had earlier valued the pair
at £21,000. Calculate capital gains for Maryam for 08/09.

Question D16 (sale at below market value)

a) Zahid sold his shop, being used in business, to his brother Fazal in August 2008
for £220,000 when it was valued at £280,000. Zahid had purchased the shop in
May 1999 for £105,000. Calculate capital gains tax liability for Zahid.

b) Fazal sold the shop to Hamid in March 2009 for £305,000. Calculate his capital
gains tax liability.

Question D17
a) Mahmood had purchased 15,000 shares in Flack plc in February 2001 for £4
each. In January 2004 he received 1 for 3 bonus issue.

He sold 10,000 shares to his son Saad in December 2008 for £50,000. The
shares were quoted on the day of sale at bid price of 620-644 pence per share
and bargains of 612-648 pence. business in nature. Calculate capital gains for
Mahmood for 08/09.

b) Saad sold all his shareholding in Flack plc in March 2009 for £68,000. Calculate
his capital gains tax liability if he had capital tax losses of £6,000 brought forward
from last year.

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F6 – Taxation (UK)

Exam Question 11 (December 2004)

(a) Amanda Perkins is 29 years old and is a UK resident. During the tax year 2008-
09 she made the following disposals of capital assets:
• 17 August 2008: Four acres of land were sold for a gross amount of £80,000.
An auctioneer's fee of 10% was charged on the disposal. The land had been
part of a ten-acre plot that had cost £120,000, in September 1999. The
market value of the remaining six acres was £240,000, in August 2008.
• 15 November 2008: A house, which had never been her main residence, was
sold for £290,000. It had cost £186,000 in May 1988. The house has never
been used as a business asset.
• 14 January 2009: 2,000 shares in APC Ltd were sold for £3,500. Amanda's
purchases of APC Ltd shares have been:
14 September 1995: 1,000 shares for £640
16 November 2001: 500 shares for £550
19 October 2005: 500 shares for £775
14 January 2009: 200 shares for £300
The shares are classed as a business asset. Amanda had a capital loss of £8,500
bought forward as at 6 April 2008.

Required:
Calculate Amanda's net taxable gains for the tax year 2008-09. (You are not
required to calculate the capital gains tax payable.) (16 marks)

(b) Amanda's father, Harry, owns a small shop, which he has always used as a
business asset. It cost him £90,000 in October 1999. On 14 February 2009 he sold
the shop to Amanda for £115,000 when it had a market value of £185,000.

Required:
(i)Calculate Harry's chargeable gain on the disposal of the shop assuming that
holdover relief is claimed on the gift of the business asset. (4 marks)
(ii)State Amanda's base cost for future capital gains tax purposes. (1 mark)

Exam Question 12 (December 2005)

Sophia Tang, aged 78, has been in business as a sole trader since 1 April 1985. On
31 March 2009 she transferred the business to her daughter Wong, at which time the
following assets were sold to Wong:
1. A freehold shop with a market value of £260,000. The shop had been purchased
on 1 July 2001 for £113,000, and has always been used by Sophia for business
purposes. Wong paid Sophia £160,000 for the shop.
2. A freehold warehouse with a market value of £225,000. The warehouse had been
purchased on 1 April 1985 for £120,100, and has never been used by Sophia for
business purposes. Wong paid Sophia £100,000 for the warehouse.
Where possible, Sophia and Wong have elected to hold over any gains arising.
Sophia is a 40% taxpayer. She made no other capital disposals in the tax year.

Required:
(a) Calculate Sophia’s capital gains tax liability for the tax year 2008–09. (10 marks)
(b) (i) Explain why it would have been beneficial for capital gains tax purposes if
Sophia had postponed the transfer of her business until 6 April 2009.
(ii) Explain the capital gains tax implications if Sophia had retained the
business until her death, with the assets then passing to Wong under the terms of
Sophia’s will.

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F6 – Taxation (UK)

Principal Private Residence

The 36 months directly preceding the disposal of property
Any period or periods which together do not last more than three years
An unlimited period throughout which the individual was employed abroad
Any periods or period not lasting more than four years, throughout which the
individual was prevented from residing in the property because
a. His place of work was too far from his property
b. His employer required him to reside somewhere else

Question D18 (Principal Private Residence)

Hasan purchased a house in London costing £95,000 on 1.9.95. He lived in it till
31.12.97, when he moved to Manchester taking up a new job. He came back to
London on 31.12.99 and lived in the house. On 1.1.01 he took up an offer to work in
Japan for a year, and after coming back he continued living in the house till
31.12.03. On 1.1.04 he purchased an apartment close to his work, and shifted there.
He sold the house on 31.3.09 for £245,000. Calculate capital gains for 08/09.

Question D19 (letting relief – business use)

Zeeshan sold a house for £235,000 on 31.12.08. He had purchased it on 1.5.00 at a
sum of £95,000. He lived there except for the period between 1.1.03 to 31.12.04,
when the house was let out. From 1.5.00 to 31.12.02, one room of the house
(constituting 20% of the areas) was used for business purposes. Calculate capital
gains for 08/09.

Question D20 (Roll over relief)

Babar purchased a free hold factory building costing £225,000 in 1995 at a cost of
£250,000. He sold the building in June 2008 for £525,000 and purchased another
factory building in the vicinity for a sum of £475,000 in February 2009. Both
buildings are used in business and Babar claims all reliefs available to him. Calculate
his capital gains for 08/09.

Question D21
Ahmed sold a free hold factory building for £325,000 in December 2008. He had
purchased the building in January 2003 at a cost of £120,000, after selling a freehold
warehouse in March 2002 for 145,000. The amount of chargeable gains arising on
sale of warehouse was £70,000. Both buildings are used in business and Ahmed
claims all reliefs available to him. Calculate his capital gains for 08/09.

Question D22 (Assets lost / destroyed)

Maryam purchased a diamond necklace costing £8,400 on 12.06.01. The necklace
was stolen on 15.1.08, and the insurance company paid a compensation of £12,000
on 31.5.08. Maryam purchased another necklace using the compensation for a sum
of £15,800 on 1.7.08. Calculate her capital gains for 08/09.

Question D23 (Assets lost – restriction of gains)

Asma purchased a gold bracelet costing £7,200 on 31.02.95. The necklace was
stolen on 21.11.07, and the insurance company paid a compensation of £12,000 on
30.6.08. Asma purchased another bracelet using the compensation for a sum of
£11,500 on 1.9.08.

Calculate her capital gains for 08/09.

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