1. BTAX Business Taxation
Session 3: Corporation Tax: Chargeable Gains

2. 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

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

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

5. 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

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

7. 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

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

9. 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

10. Chattels
As for CGT
CGT_intro

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

12. 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

13. 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

14. Rollover Relief
What is this?
CGT-shares

15. Rules: category of assets
CGT-shares

16. Rules
Question 3.8a
CGT-shares

17. 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

18. 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