Tx notes fa22 Final

Corporation tax liability
£400,000 at 19%
76,000

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21. Swish Ltd 
(a)
Computation of Trading loss for the year ended 31 March 2023 
£
£
Net loss per accounts
(116,500)
Add back:
Depreciation
10,800
Entertaining
1,200
12,000
(104,500)
Less:
Capital allowances £20,000 
×
18%
(3,600)
Trading Loss
(108,100)
(b)
Year ended 31 
March
2022
2023
£
£
Trading profit
40,000
Nil
Interest receivable
2,000 
3,500
Chargeable gain
–
44,500
Total Profits
42,000
48,000
Less: Current Year / Carry back loss relief
(42,000) (48,000)
Taxable Total Profit
Nil
Nil
Loss memorandum
Loss for y/e 31/3/22 (part (a))
108,100
Less:
Current Year relief y/e 31/3/22
(48,000)
Carry back relief y/e 31/3/21
(42,000)
Loss available to carry forward against future total profits
18,100

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22. Trunk Limited 
Matching rules:
‣
same day
 
‣
previous 9 days
1,000
Calculate the gain: 
Share Pool:
Calculate the gain:
£
Sale proceeds (1,000 shares)
16,000
Less cost
(15,000)
Chargeable Gain
1,000
Number
Cost
Indexed 
cost
July 1994
1,000 10,000
10,000
480
1,000 10,000
10,480
Purchase February 1996
500
6,000
6,000
1,500 16,000
16,480
Bonus issue 1:2
750
–
–
2,250 16,000
16,480
Index to October 1998 0.090 x 16,480
1,483
2,250 16,000
17,963
Rights issue 1:3 @ £9 per share
750
6,750
6,750
3,000 22,750
24,713
Index to December 2018 0.703 x 24,713 
17,373
3,000 22,750
42,086
Sale October 2022
(1,500) (11,375)
(21,043)
£
Sale proceeds (1,500 shares)
24,000
Less cost
(11,375)
Unindexed gain
12,625
Less indexation allowance (21,043 – 11,375)
(9,668)
Chargeable gain
2,957
Total chargeable gains:
Previous 9 days
1,000
Pool
2,957
Chargeable gains to include in Corporation tax computation
3,957

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23. Mighty Ltd 
The chargeable gain on the disposal of the freehold factory is £40,000 (£160,000 - £120,000).
(a)
Larger freehold factory
The full gain will be rolled over against the base cost of the new factory as all the proceeds are 
reinvested:
(b)
Smaller freehold factory
As not all of the proceeds are reinvested, the capital gain element that cannot be rolled over 
and will remain chargeable will be £5,000 (£160,000 - £155,000). This will be immediately 
chargeable to corporation tax. The balance of the gain will be rolled over as follows:
(c)
Lease
If all the proceeds are used to acquire a depreciating asset (one with an expected life of no 
more than 60 years), the capital gain is deferred until the earlier of:
‣
the date that the leasehold property is sold
‣
the date when the leasehold property ceases to be used in Mighty Ltd’s trade
‣
the expiry of ten years from the acquisition date.
Therefore the base cost of the lease remains at £180,000. If, before the held over gain 
becomes chargeable, a non-depreciating asset is acquired, the capital gain can be rolled over 
in the usual way. In this question, if the freehold of the factory is acquired in the next two to 
three years, all the proceeds will be reinvested and so the rollover claim would switch to the 
freehold factory cost of £200,000.
In all the cases above the reinvestment must take place within 1 year before to 3 years after the 
disposal date if the gain is to be eligible for relief.
£
Cost of factory
170,000
Gain rolled over 
(40,000)
Base cost of new factory
130,000
£
Cost of factory
155,000
Gain rolled over (£40,000 - £5,000) 
(35,000)
Base cost of new factory
120,000

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