Exam Style Question

Ali and Elena have been married for years and they have approached you regarding the
disposals of assets made during the years as follows:
Joint Disposals

(i) During the tax year 2022-2023, the couple sold some chairs for £8,200 and incidental
costs of disposals amounted to £250. The chairs were bought in 2016 for £ 4,000.

(ii) The couple bought a house on 2 January 2004 for £89,600 and costs incurred on
acquisition amounted to £250. The couple occupied the house as their main residence
till 1 June 2008 when they left it to go on a holiday for ten months. During their
absence the house was renovated in January 2009 for £8,000. After the holiday, they
returned to their residence and on 1 October 2013 they began to use one-quarter of
the house for business purposes and the remaining as their main residence. The
business continues until 28 February 2023 when they sold the house for £445,000,
cost for advertising the sale and other disposal costs amounted to £700.

(iii) The couple bought a chargeable asset in August 2010 for £160,000, paying acquisition
cost of £6,400. In July 2018, the couple sold one quarter of the interest in the asset for
£80,000 and incidental costs of disposal incurred were £1,100. The remaining three-
quarters interest in the asset was value at £320,000 in July 2018. In January 2023, the
couple sold the remaining three-quarters interest in the asset for £ 235,000 and
incidental costs of disposal were £600.

Ali’s Disposals

(iv) On 1 May 2010, Ali bought 6,000 shares in Alpha Plc for £66,000 and on 1 July 2022 he
transferred 2,000 shares worth £45,000 to his spouse Elena.

(v) Ali also made the following acquisitions of ordinary shares in Indigo Plc:
Date Number of shares Cost
£
9 Sept 2001 1,400 54,000
5 July 2004 1,000 36,300
1 Feb 2010 800 44,000
February 2023 200 16,000
On 1 September 2012 the company made a 1 for 10 rights issue at £22.25 per share
and Ali decided to buy all the shares offered to him. On 1 February 2023, Ali sold 1,420
shares for £72 each, assuming no other acquisitions were made within the next 30
days.
(vi) On 1 July 2022, Ali sold some qualifying corporate bonds for £12,000 and these were
bought in May 2018 for £18,000.

Elena’s Disposals

(vii) On 1 June 2022, Elena sold 50% of the shares transferred to her in 2015 for £18,000
and incidental cost of disposal amounted to £110.

(viii) In May 2011, Elena bought 100 acres of land for £65,000. In June 2018 she sold 10
acres for £9,000. The disposal was not caused by compulsory acquisition. The value of
the remainder of the land in June 2018 was £60,000. Elena had other capital gains in
2018-2019, sufficient to absorb her annual exemption for the year, and she therefore
made a small part disposal claim. In August 2022, Elena sold 40 acres of land for
£62,000 and the remainder of the land had a market value of £88,000 on the date of
sale in August 2022.

(ix) Elena sold a cottage for £125,000 in September 2022, the cottage was bought in May
2005 for £85,000 and incidental costs of acquisition amounted to £250. In April 2011,
Elena did some major refurbishment of the cottage at the cost of £12,000.

Other information:

(x) Ali is a high-income earner and had £5,000 of capital losses carried forward from
previous disposals.

(xi) Elena works part-time in a shop and earns £38,900 as income for the tax year 2022-
2023. She also had £2,300 of capital losses carried forward from previous disposals.

Compute the capital gain tax (CGT) for Ali and Elena for the tax year 2022-2023 and
state the due date for submission of return.
Melville book (practice questions not completed in seminar)

p281 ex 18.7; P312 ex 20.5;

P 313 Q 20.9 – add bought 200 shares in November 2022 for £ 900.

P 280 Ex 18.3; p318 Q21.5