June 2023 to March 2024 exams Watch free ACCA TX lectures
Answer to Example 5 (a)
New factory was purchased for £750,000 . This means that £50,000 of the sale proceeds has
not been reinvested and this amount of the gain remains chargeable.
Business asset disposal relief is not available in respect of the gain of £50,000 that is
immediately chargeable as it is not the disposal of the business itself, but simply an asset used
in that business.
(b) New factory purchased for £600,000. In this case, the amount of proceeds not reinvested of £200,000 (800,000 - 600,000) exceeds
the gain made on the old factory. Thus none of the gain is eligible to be rolled over and so there
is no adjustment to the base cost of the new factory. It remains at the purchase price of
£600,000. Business asset disposal relief would not be available against the gain of £120,000 in
2023/24 as it is not the disposal of the business.
Answer to Example 6 (a)
The non-qualifying part of the gain is:
£9,000 (£600,000 - £540,000 = £60,000
×
15%).
This is taxable immediately, as it does not qualify for rollover relief. Business asset disposal
relief will not be available as it is not the sale of the business.
(b)
As all the business proportion of the sale proceeds has been reinvested in a business asset the
business proportion of the gain (85%) may be rolled over in full. The base cost of the new
factory is reduced by the amount of the gain rolled over. It is therefore:
Proceeds
800,000
Less: cost
(680,000)
Gain
120,000
Less: ROR
(70,000) This is the balancing figure
Taxable gain
50,000
£ Purchase cost
650,000
Capital gain rolled over (£60,000
×
85%)
(51,000)
Base cost
599,000
262
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