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5.
Reinvestment in depreciating asset
5.1. Definition
(a)
An asset with an expected life of a maximum 60 years or
(b)
Fixed plant and machinery.
Note:
You will only be examined on fixed plant and machinery and leasehold property with a life of
60 years or less.
5.2.
Effect
If the new asset is a depreciating asset, then:
(a)
The gain deferred is not deducted from the cost of the new asset
(b)
Instead it is postponed until the earliest of:
(i)
disposal of the new asset
(ii)
the date the new asset ceases to be used in the trade
(iii)
10 years after the new asset was acquired.
(c)
Business asset disposal’ relief is only available if any remaining gains after the relief are in
relation to the disposal of the whole business.
Example 7
Charles purchased a freehold factory in May 2010 for £300,000 for use within his trade. In June 2022
he sold it for £500,000 and in May 2022 bought a 55 year leasehold factory building for £600,000. In
February 2024 Charles sold the leasehold factory for £640,000 and moved into rented premises.
Calculate the chargeable gains arising on the disposals of the freehold factory in June 2022
and the leasehold factory in February 2024, assuming Charles claims to defer gains where
possible.
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