BTAX Business Taxation Session 3: Corporation Tax: Chargeable Gains

OBJECTIVES OF THIS SESSION To be able to: Explain the difference between the taxation of gain by a company and an individual Calculate chargeable gains, with indexation Explain the rules for the following special situations: Part Disposals, Enhancements, Chattels, Shares, Rollover Relief CGT_intro

Main differences of CGT for a Company What are the differences? CGT_intro

Exempt Assets for businesses As for CGT, plus: Trading stock CGT_intro

Chargeable Gains Chargeable Gains during CAP Netted off against any Capital Losses during CAP Excess Gains added to other income to form part of TTP Subject to Corporation Tax Excess losses c/f against future Chargeable Gains of same company Get students to recap CAP/CGT etc Demonstrate an example on WB CGT_intro

Calculate Gain Proceeds - Costs of disposal =Net proceeds - Original cost (+ incidental costs) - Improvements Unindexed Gain - Indexation Allowance = Chargeable Gain

Indexation Allowance RPId - RPIa to 3dp RPIa RPId = RPI at date of disposal RPIa = RPI at date of acquisition Cannot increase or create a loss Question 3.1 Get students to work out a couple of examples using table. Simple on WB Students attempt 4.2 – April Ltd Students attempt Albert Ltd from handout CGT_intro

Cost of Part Disposal Indexation Allowance on apportioned cost Work Fielding page 4.11 Students attempt Bernard Ltd from handout. CGT_intro

Improvement expenditure Indexation allowable from date of improvement to date of sale Question 3.3 Example Page 4.12 Ledger Students try question 4.4 Students attempt Charlie Ltd from handout CGT_intro

Chattels As for CGT CGT_intro

Share Disposals: Companies What are the Matching Rules for Companies? CGT-shares

1985 Pool: examinable Number of shares, cost of shares & indexed cost of shares Index prior to each operative event – do not round indexation factor to 3dp Operative event: purchase of shares, bonus issue, disposal of shares Deal with operative event Example Page 4.18 Students try Oliver Ltd CGT-shares

Rights Issues For matching rules matched to original purchase For Indexation Allowance, calculated from date of payment of rights issue Question 3.5 CGT-shares

Rollover Relief What is this? CGT-shares

Rules: category of assets CGT-shares

Rules Question 3.8a CGT-shares

Partial reinvestment What if only part of the proceeds is spent on the new asset? Question 3.8b Example page 4.24 Students try M Ltd Students try D Ltd Students try 4.5 page 4.29 CGT-shares

Homework Tutorial book questions 4.2, 4.8, 4.1, 4.3, 4.4, 4.5, 4.6, 4.7 Make notes from chapter 4