We studied chargeable gains for individuals earlier in this Text. In this chapter,
we will consider the treatment of chargeable gains for companies.
Companies pay corporation tax on their chargeable gains, rather than capital
gains tax. The computation of gains for companies is slightly more complicated
than for individuals because companies are entitled to indexation allowance.
We also consider the matching rules for companies which dispose of shares in
other companies. Again, these rules are slightly more complicated than for
individuals. We also consider the relief for substantial shareholdings.
Next, we look at how the relief for replacement of business assets applies to
Finally, we consider the relief which is available to some small companies
which disincorporate and transfer the company’s business to its shareholders.
In the next chapter, we look at the computation of corporation tax.
|4||Corporation tax liabilities in situations involving further overseas and group aspects and in relation to special types of company, and the application of additional exemptions and reliefs|
|(a)||The contents of the Paper F6 study guide, for corporation tax, under headings:||2|
|||E3 Chargeable gains for companies|
|(f)||The use of exemptions and reliefs in deferring and minimising corporation tax liabilities||3|
|(i)||Advise on the availability and the application of disincorporation relief|
|(ii)||Determine the application of the substantial shareholdings exemption|
You may well be asked to compute chargeable gains or losses for a company as part of a tax planning question so you must know the rules in this chapter very well.
This chapter mainly revises topics you should be familiar with from F6. There have been no substantial changes in Financial Year 2015 from Financial Year 2014 in the material you have studied previously. The two new topics are disincorporation relief and the substantial shareholdings exemption.
1 Corporation tax on chargeable gains
|Chargeable gains for companies are computed in broadly the same way as for individuals, but indexation allowance applies and there is no annual exempt amount.|
Companies do not pay capital gains tax. Instead their chargeable gains are included in taxable total profits.
A company’s capital gains or allowable losses are computed in a similar way to individuals but with a few major differences:
- There is relief for inflation called the indexation allowance
- No annual exempt amount is available
- Different matching rules for shares apply if the shareholder is a company.
|A non-UK resident company which disposes of a residential property may be liable to UK tax on the gain in a similar way to a non-UK individual. However, the disposal by a company of a residential property is excluded from the P6 (UK) syllabus.|
Exam focus point
2 Indexation allowance 9/15
|The indexation allowance gives relief for the inflation element of a gain.|
The purpose of having an indexation allowance is to remove the inflation element of a gain from taxation.
Companies are entitled to indexation allowance from the date of acquisition until the date of disposal of an asset. It is based on the movement in the Retail Price Index (RPI) between those two dates.
For example, if J Ltd bought a painting on 2 January 2005 and sold it on 19 November 2015, the indexation allowance is available from January 2005 until November 2015.
|The indexation factor is:
RPI for month of disposal RPI formonth of acquisition
RPI for month of acquisition
The calculation is expressed as a decimal and is rounded to three decimal places.
Indexation allowance is available on the allowable cost of the asset from the date of acquisition (including incidental costs of acquisition). It is also available on enhancement expenditure from the month in which such expenditure becomes due and payable. Indexation allowance is not available on the costs of disposal.
An asset is acquired by a company on 15 February 2003 (RPI = 179.3) at a cost of £5,000. Enhancement expenditure of £2,000 is incurred on 10 April 2004 (RPI = 185.7). The asset is sold for £25,500 on 20 December 2015 (assumed RPI =259.3). Incidental costs of sale are £500. Calculate the chargeable gain arising.
The indexation allowance is available until December 2015 and is computed as follows.
= 0.446 £5,000 2,230
= 0.396 £2,000 792
Indexation allowance 3,022
The computation of the chargeable gain is as follows.
Less incidental costs of sale (500)
Net proceeds 25,000
Less allowable costs £(5,000 + 2,000) (7,000)
Unindexed gain 18,000
Less indexation allowance (see above) (3,022)
Indexed gain 14,978
Indexation allowance cannot create or increase an allowable loss. If there is a gain before the indexation allowance, the allowance can reduce that gain to zero but no further. If there is a loss before the indexation allowance, there is no indexation allowance.
If the indexation allowance calculation gives a negative figure, treat the indexation as nil: do not add to the indexed gain.
3 Disposal of shares by companies 12/13
There are special rules for matching shares sold by a company with shares purchased. Disposals are matched with acquisitions on the same day, the previous nine days and the FA 1985 share pool.
3.1 The matching rules
We have discussed the share matching rules for individuals earlier in this Text. We also need special rules for companies.
For companies the matching of shares sold is in the following order.
- Shares acquired on the same day
- Shares acquired in the previous nine days, if more than one acquisition on a “first in, first out” (FIFO) basis
- Shares from the FA 1985 pool
The composition of the FA 1985 pool in relation to companies which are shareholders is explained below.
Exam focus Learn the ‘matching rules’ because a crucial first step to getting a shares question right is to correctly point match the shares sold to the original shares purchased.
|3.2 Example: share matching rules for companies
Nor Ltd acquired the following shares in Last plc:
|Date of acquisition||No of shares|
Nor Ltd disposed of 20,000 of the shares on 15 July 2015.
We match the shares as follows:
(a) Acquisition on same day: 5,000 shares acquired 15 July 2015.
(b) Acquisitions in previous 9 days: 5,000 shares acquired 11 July 2015.
|(c) FA 1985 share pool: 10,000 shares out of 30,000 shares in FA 1985 share pool (9.11.02 and
3.3 The FA 1985 share pool
Exam focus The examination team has stated that a detailed question will not be set on the pooling provisions. point However, work through the examples below as you are expected to understand how the pool works.
The FA 1985 pool comprises the following shares of the same class in the same company.
- Shares held by a company on 1 April 1985 and acquired by that company on or after 1 April 1982.
- Shares acquired by that company on or after 1 April 1985.
We must keep track of:
- the number of shares
- the cost of the shares ignoring indexation
- the indexed cost of the shares
The first step in constructing the FA 1985 share pool is to calculate the value of the pool at 1 April 1985 by indexing the cost of each acquisition before that date up to April 1985.
3.4 Example: the FA 1985 share pool
Oliver Ltd bought 1,000 shares in Judith plc for £2,750 in August 1984 and another 1,000 for £3,250 in December 1984. RPIs are August 1984 = 89.9, December 1984 = 90.9 and April 1985 = 94.8. The FA 1985 pool at 1 April 1985 is as follows.
|August 1984 (a)||1,000||2,750||2,750|
|December 1984 (b)||1,000||3,250||3,250|
= 0.055 £2,750 151
= 0.043 £3,250 140
Indexed cost of the pool at 1 April 1985 6,291
Disposals and acquisitions of shares which affect the indexed value of the FA 1985 pool are termed ‘operative events’. Prior to reflecting each such operative event within the FA 1985 share pool, a further indexation allowance (an ‘indexed rise’) must be computed up to the date of the operative event concerned from the date of the last such operative event (or from the later of the first acquisition and April 1985 if the operative event in question is the first one).
Indexation calculations within the FA 1985 pool (after its April 1985 value has been calculated) are not rounded to three decimal places. This is because rounding errors would accumulate and have a serious effect after several operative events. If there are several operative events between 1 April 1985 and the date of a disposal, the indexation procedure described above will have to be performed several times over.
Following on from the above example, assume that Oliver Ltd acquired 2,000 more shares on 10 July 1986 at a cost of £4,000. Recalculate the value of the FA 1985 pool on 10 July 1986 following the acquisition. RPI July 1986 = 97.5.
|No of shares||Cost||Indexed cost|
|Value at 1.4.85 b/f||2,000||6,000||6,291|
|Value at 10.7.86||4,000||10,000||10,470|
Indexed rise £6,291 179
In the case of a disposal, following the calculation of the indexed rise to the date of disposal, the cost and the indexed cost attributable to the shares disposed of are deducted from the amounts within the FA 1985 pool. The proportions of the cost and indexed cost to take out of the pool should be computed by using the proportion of cost that the shares disposed of bear to the total number of shares held.
The indexation allowance is the indexed cost taken out of the pool minus the cost taken out. As usual, the indexation allowance cannot create or increase a loss.
Continuing the above exercise, suppose that Oliver Ltd sold 3,000 shares on 10 July 2015 for £23,000.
Compute the gain, and the value of the FA 1985 pool following the disposal. Assume RPI July 2015 = 258.2.
|No of shares||Cost||Indexed cost|
|Value at 10.7.86||4,000||10,000||10,470|
Cost and indexed cost £10,000 and £27,727 (7,500) (20,795)
|Value at 10.7.15
The gain is computed as follows:
|Less indexation allowance £(20,795 7,500)||(13,295)|
3.5 Bonus and rights issues
When bonus issue shares are issued, all that happens is that the size of the original holding is increased. Since bonus issue shares are issued at no cost there is no need to adjust the original cost and there is no operative event for the FA 1985 pool (so no indexation allowance needs to be calculated).
When rights issue shares are issued, the size of the original holding is increased in the same way as for a bonus issue. So if the original shareholding was part of the FA 1985 pool, the rights issue shares are added to that pool. This might be important for the matching rules if a shareholding containing the rights issue shares is sold shortly after the rights issue.
However, in the case of a rights issue, the new shares are paid for and this results in an adjustment to the original cost. For the purpose of calculating the indexation allowance, expenditure on a rights issue is taken as being incurred on the date of the issue and not the date of the original holding.
3.6 Example: bonus and rights issue
S Ltd bought 10,000 shares in T plc in May 2000 (RPI = 170.7) at a cost of £45,000. There was a 2 for 1 bonus issue in October 2002. There was a 1 for 3 rights issue in June 2006 (RPI = 198.5) at a cost of £4 per share. S Ltd took up all of its rights entitlement. S Ltd sold 20,000 shares in T plc for £120,000 in January 2016 (assumed RPI = 259.5).
FA 1985 share pool
No of shares Cost Indexed cost
5.00 Acquisition 10,000 45,000 45,000
10.02 Bonus 2:1
6.06 Indexed rise
Rights 1:3 40,000 40,000
1.16 Index rise
The gain is:
|Less indexation allowance (£60,351 – 42,500)||(17,851)|
3.7 Reorganisations and takeovers
The rules on reorganisation and takeovers apply in a similar way for company shareholders as they do for individuals.
In the case of a reorganisation, the new shares or securities take the place of the original shares. The original cost and the indexed cost of the original shares is apportioned between the different types of capital issued on the reorganisation.
Where there is a takeover of shares which qualifies for the ‘paper for paper’ treatment, the cost and indexed cost of the original holding is passed onto the new holding which take the place of the original holding.
J Ltd acquired 20,000 shares in G Ltd in August 1990 (RPI = 128.1) at a cost of £40,000. It acquired a further 5,000 shares in December 2006 (RPI = 202.7) at a cost of £30,000.
In March 2016, G Ltd was taken over by K plc and J Ltd received one ordinary share and two preference shares in K plc for each one share held in G Ltd. Immediately following the takeover, the ordinary shares in K plc were worth £4 per share and the preference shares in K plc were worth £1 per share.
Show the cost and indexed cost of the ordinary shares and the preference shares.
G Ltd FA 1985 share pool
No. of shares Cost Indexed cost
8.90 Acquisition 20,000 40,000 40,000
12.06 Indexed rise
202.7 128.1 £40,000 23,294
Acquisition 5,000 30,000 Pool at takeover 25,000 93,294
Note that the takeover is not an operative event because the pool of cost is not increased or decreased and so it is not necessary to calculate an indexed rise.
Apportionment of cost/indexed cost to K plc shares
No. of shares MV Cost Indexed cost
£ £ £
Ords 1 25,000 100,000 46,667 62,196 Prefs 2 50,000 50,000 31,098 Totals 150,000 93,294
On a disposal of shares in K plc, indexation allowance will be calculated from December 2006.
4 Disposal of substantial shareholdings 6/14, 6/15, 9/15
|Where a trading company owns shares in another trading company, there is an exemption on disposal if 10% or more of the shares are held.|
One of the competencies you require to fulfil Performance Objective 17 Tax planning and advice of the PER is to mitigate and/or defer tax liabilities through the use of standard reliefs, exemptions and incentives. You can apply the knowledge you obtain from this section of the text to help to demonstrate this competence.
There is an exemption from corporation tax for any gain arising when a trading company (or member of a trading group) disposes of the whole or any part of a substantial shareholding in another trading company (or in the holding company of a trading group or sub-group).
|A substantial shareholding is one where the investing company holds at least 10% of ordinary share capital and is beneficially entitled to at least 10% of the
(a) profits available for distribution to equity holders, and
(b) assets of the company available for distribution to equity holders on a winding up.
To meet the 10% test shares owned by members of a chargeable gains group (see later in this Text) may be amalgamated. The 10% test must have been met for a continuous twelve month period during the two years preceding the disposal.
The twelve month period condition can also be satisfied by including a period during which assets, which are being used in its trade by the company whose shares are being disposed of (Company A),
were being used in the trade of another group company (Company B) and then transferred to Company A before the sale of the Company A shares. This enables the exemption to apply in the situation where an existing trade carried on by one group company is transferred to a new group company before that new company is sold outside the group. This may be preferred to selling the original company carrying on the trade, for example if it also has contingent liabilities.
The exemption is given automatically and cannot be disclaimed. This means that as well as exempting gains, it denies relief for losses.
The exemption applies to the disposal of part of a substantial holding. This means that if A Ltd owns 10% of the ordinary share capital in B Ltd, and disposes of 1% of that share capital, any gain will be exempt. In addition, the disposal of the remaining 9% may result in an exempt gain.
4.2 Example: disposal of substantial shareholding
On 1 December 2008 SD Ltd bought 20% of the shares in AM Ltd. The shareholding qualifies for the substantial shareholding exemption. During its accounting period to 31 March 2016, SD Ltd made the following disposals:
- On 30 June 2015 it disposed of a 15% holding in AM Ltd.
- On 30 December 2015 it disposed of the remaining 5% holding in AM Ltd.
Both of these shareholdings qualify for the substantial shareholdings exemption. Clearly the first disposal is of at least a 10% holding which was held for twelve months prior to disposal. The second disposal also qualifies despite being only a 5% holding, because SD Ltd owned a 10% holding throughout a twelve month period beginning in the two years prior to this second disposal.
5 Relief for replacement of business assets (rollover
relief) 6/12, 6/13, 6/15
FAST FORWARD Relief for replacement of business assets is available to companies to defer gains arising on the disposal of business assets.
5.1 Conditions for relief
As for individuals, a gain may be rolled over by a company where the proceeds on the disposal of a business asset are spent on a replacement business asset under rollover relief.
A claim for the relief must be made by the later of four years of the end of the accounting period in which the disposal of the old asset takes place and four years of the end of the accounting period in which the new assets is acquired. For example, if a disposal is made by a company in its accounting period to 30 June 2016 and a claim to roll-over relief is made in respect of a new asset acquired in the accounting period to 30 June 2015 the time limit for a claim is 30 June 2020 (four years after the end of the accounting period in which the disposal of the old asset was made).
The conditions for the relief to apply to company disposals are:
- The old assets sold and the new asset bought are both used only in the trade of the company (apportionment into business and non-business parts available for buildings).
- The old asset and the new asset both fall within one (but not necessarily the same one) of the following classes.
- Land and buildings (including parts of buildings) occupied as well as used only for the purposes of the trade
- Fixed plant and machinery
- Reinvestment of the proceeds received on the disposal of the old asset takes place in a period beginning one year before and ending three years after the date of the disposal.
- The new asset is brought into use in the trade on its acquisition.
Note that goodwill is not a qualifying asset for the purposes of corporation tax.
5.2 Operation of relief
Deferral is obtained by deducting the indexed gain from the cost of the new asset. For full relief, the whole of the proceeds must be reinvested. If only part is reinvested, a gain equal to the amount not invested, or the full gain, if lower, will be chargeable to tax immediately.
The new asset will have a base cost for chargeable gains purposes of its purchase price less the gain rollover over.
D Ltd acquired a factory in April 2000 (RPI = 170.1) at a cost of £120,000. It used the factory in its trade throughout the period of its ownership.
In August 2015 (assumed RPI = 258.4), D Ltd sold the factory for £225,000. In November 2014, it acquired another factory at a cost of £195,000.
Calculate the gain chargeable on the sale of the first factory and the base cost of the second factory.
Chargeable gain on sale of first factory
Proceeds 225,000 Less cost (120,000)
Unindexed gain 105,000
258.4 –170.1170.1 = 0.519 £120,000 (62,280)
Indexed gain 42,720
Less rollover relief (balancing figure) (12,720)
Chargeable gain: amount not reinvested £(225,000 – 195,000) 30,000
Base cost of second factory
Cost of second factory 195,000
Less rolled over gain (12,720)
Base cost 182,280
5.3 Depreciating assets 12/12, 12/15
The relief for investment into depreciating assets works in the same way for companies as it does for individuals.
The indexed gain is calculated on the old asset and is deferred until the gain crystallises on the earliest of:
- The disposal of the replacement asset
- The date the replacement asset ceases to be used in the trade (c) Ten years after the acquisition of the replacement asset.
5.4 Intangible fixed assets
|There is a similar replacement of business assets relief for replacement of intangible fixed assets. However, relief is restricted to the gain based on original cost, not on the written down cost.|
As we have seen earlier in this Text, gains on the disposal of intangible fixed assets are taxable as trading income rather than as chargeable gains. However, there is a form of relief for replacement of intangible business assets for companies which is very similar to that for chargeable gains and so it is convenient to consider it in this section.
A profit on the disposal of an intangible fixed asset can be rolled over by the acquisition of a replacement asset within the period beginning one year before and ending three years after the date of the disposal. Relief is given by rolling over the gain into the base cost of the replacement asset.
The maximum profit which can be rolled over is the profit comparing proceeds with original cost, not with the written down cost. Therefore, if the intangible fixed asset has been written down, the gain relating to the amount written down will be chargeable as trading income.
If the expenditure on the new intangible fixed asset equals or exceeds the proceeds of the old intangible fixed asset, then relief is available to roll over the whole of the gain based on the original cost.
If expenditure on the new intangible fixed asset is less than the proceeds of the old intangible fixed asset, the relief is restricted to the excess of the amount invested in the new intangible fixed asset over the original cost of the old asset.
In August 2015, Turnbull Ltd disposed of patents acquired in 2012 for use in its trade. The patents had cost £150,000 but had been written down to £110,000 by the date of sale. The sale realised £200,000 and the company acquired further patents two months later. Calculate how much of the profit could be rolled over, any amount remaining taxable as trading income and the base cost of the new asset, if the new patents were acquired for (a) £280,000, or (b) £180,000.
- New investment £280,000 (ie all proceeds invested in new asset)
Accounting profit on old patents
£200,000 – £110,000 £90,000
Profit for potential rollover
£200,000 – £150,000 £50,000
Profit which cannot be rolled over taxable as trading income
£90,000 – £50,000 £40,000
Base cost of replacement asset (new patents) £280,000 – £50,000 £230,000
- New investment £180,000 (ie partial investment in new asset)
Accounting profit (as above) £90,000
Profit for potential rollover
£180,000 – £150,000 £30,000
Profit which cannot be rolled over taxable as trading income
£90,000 – £30,000 £60,000
Base cost of replacement new asset
£180,000 – £30,000 £150,000
6 Disincorporation relief
FAST FORWARD Disincorporation relief allows a company to transfer its business to its shareholders without giving rise to taxable gains/profits on land and buildings and goodwill.
A business may be run as either an incorporated business (ie a company) or an unincorporated business (ie a sole trader or partnership).
Where the shareholders (owners) of a company decide that they would prefer to operate the business as an unincorporated business (ie they want to disincorporate), the company will transfer the business to the shareholders and thus dispose of its capital assets. This is likely to result in a corporation tax charge on any gain/profit arising on the assets transferred. This may be a disincentive to disincorporation.
Disincorporation relief allows certain small companies to transfer the company’s business to its shareholders without a corporation tax charge arising on the transfer of particular assets, provided certain conditions are satisfied.
6.2 Operation of the relief
When a company transfers its business to its shareholders, it is deemed to dispose of its assets at market value. Any chargeable gains on chargeable assets such as land and buildings, and trading profits on intangible assets such as goodwill, will give rise to a corporation tax charge.
Where disincorporation relief is claimed, any land and buildings are deemed to be transferred at the lower of their market value and their allowable acquisition cost, and goodwill is deemed to be transferred at the lower of its market value and its cost. The result is that no gain/credit arises on the disposal of these assets. The shareholders are deemed to acquire the assets at that same value.
Note that disincorporation relief does not provide relief for other tax charges which may arise on the transfer of the business such as capital allowance balancing charges or a profit on the deemed transfer of stock (inventory) at market value. Other reliefs may, however, be available for these tax charges where the company and the shareholders are connected persons (see earlier in this Text).
6.3 Conditions for relief
Disincorporation relief applies where:
- A company transfers its business to some or all of its shareholders, and
- The transfer is a qualifying business transfer, and
- The business transfer occurs in the period 1 April 2013 to 31 March 2018.
A qualifying business transfer is one where:
- The business is transferred as a going concern, and
- All of the assets of the business are transferred (except cash), and
- The total market value of goodwill and land and buildings transferred does not exceed £100,000, and
- All of the shareholders to whom the business is transferred are individuals and have held their shares for 12 months prior to the date of transfer.
6.4 Claim for relief
A claim for disincorporation relief must be made within 2 years of the date of the transfer. The claim must be made jointly by the company and all of the shareholders to whom the business is transferred. It is irrevocable.
Mr Small is a director of Little Ltd and owns all of the shares of the company. The company was incorporated on 1 January 2007 and has traded since that date, preparing accounts to 31 December each year.
Mr Small has now decided that he would prefer to operate the trade of Little Ltd as a sole trader. The company therefore transferred all of the assets of the business to Mr Small on 1 June 2015. The assets of Little Ltd on 1 June 2015 are as follows.
|Market value at
|Plant and machinery (capital allowances claimed)||10,000||15,000|
|Net current assets||22,000||–|
- Why an election for disincorporation relief can be made.
- The tax implications of the election being made.
- The date by which the election must be made.
- The transfer qualifies for disincorporation relief because:
- The company is transferring its business as a going concern to a shareholder.
- All of the assets of the business are being transferred
- The market value of the goodwill and land and buildings (£95,000) does not exceed £100,000
- The transfer is to an individual who has held shares in the company for at least 12 months prior to the transfer and
- The transfer occurred after 1 April 2013 but before 31 March 2018.
- Without disincorporation relief there would be gains arising on the business premises of £43,000 (£68,000 – £25,000) and the goodwill of £(27,000 – nil) = £27,000.
With disincorporation relief, the business premises are deemed to have been disposed of at the lower of market value (£68,000) and cost (£25,000). The deemed proceeds are therefore £25,000, so producing a nil gain. The goodwill is deemed to have been disposed of at the lower of market value (£27,000) and cost (£nil). The deemed proceeds are therefore £nil, so producing no credit.
Mr Small acquires the land and buildings at a base cost of £25,000 and the goodwill at a base cost of £nil.
- The company and Mr Small must make a joint claim by 31 May 2017 (within two years of the date of the transfer of the business).
|||Chargeable gains for companies are computed in broadly the same way as for individuals, but indexation allowance applies and there is no annual exempt amount.|
|||The indexation allowance gives relief for the inflation element of a gain.|
|||There are special rules for matching shares sold by a company with shares purchased. Disposals are matched with acquisitions on the same day, the previous nine days and the FA 1985 share pool.|
|||Where a trading company owns shares in another trading company, there is an exemption on disposal if 10% or more of the shares are held.|
|||Relief for replacement of business assets is available to companies to defer gains arising on the disposal of business assets.|
|||There is a similar replacement of business assets relief for intangible fixed assets. However, relief is restricted to the gain based on original cost, not on the written down cost.|
|||Disincorporation relief allows a company to transfer its business to its shareholders without giving rise to taxable gains/profits on land and buildings and goodwill.|
- A company is entitled to an annual exempt amount against its chargeable gains. TRUE/FALSE?
- Indexation allowance runs from the date of to date of . Fill in the blanks.
- What are the share matching rules for company shareholders?
- A Ltd has a long standing 15% shareholding in B Ltd, an investment company. Does the substantial shareholding exemption apply on a disposal of an 8% holding by A Ltd?
- H Ltd sells a warehouse for £400,000. The warehouse cost £220,000 and the indexation allowance available is £40,000. The company acquires another warehouse ten months later for £375,000. What is the amount of rollover relief?
- If a disincorporation relief claim is made no tax charge will arise on the transfer of a business to its shareholders. TRUE/FALSE?
Answers to quick quiz
- A company is not entitled to an annual exempt amount against its chargeable gains.
- Indexation allowance runs from the date of acquisition to date of disposal.
- The matching rules for shares disposed of by a company shareholder are:
- Shares acquired on the same day
- Shares acquired in the previous nine days
- Shares from the FA 1985 pool
- B Ltd is an investment company, not a trading company.
- The gain on the sale of first warehouse is:
Proceeds 400,000 Less cost (220,000)
Unindexed gain 180,000
Less indexation allowance (40,000)
Indexed gain 140,000
Less rollover relief (balancing figure) (115,000) Chargeable gain: amount not reinvested £(400,000 – 375,000) 25,000
- Disincorporation relief allows goodwill and land and buildings to be transferred at no tax cost to the company. However, it will not prevent tax charges arising on any other chargeable assets, capital allowance balancing charges or the transfer of stock (inventory) at market value (although other tax reliefs may be available).