proforma
Tamara Mundy has made several capital disposals in the tax year 2018/19 and she has asked you to help her calculate her liability to capital gains tax. Tamara was born on 25 December 1985, is a UK resident, married Bertie in 2015 and has one son, Ryan. She works full-time for Torville Ltd, has some investment income and has estimated that her taxable income for 2018/19 will be 32,150. She has unused capital losses brought forward from 2017/18 of 11,450. Tamara has provided you with the following details: On 30 June 2018 Tamara sold the family home for 466,900 in Manchester. The house had been purchased by Tamara on 1 October 2001 for 139,155. Tamara has occupied the house as her main residence from the date of purchase until 31 August 2004 when she took off and went travelling overseas for four years. Whilst travelling she signed a five year contract to work in Wales (i.e. elsewhere in the UK) starting on 1 September 2008. The job provided living accommodation as part of her job Her house in the UK was therefore unoccupied between 1 September 2004 and 31 August 2013. She returned to occupy the house as her main residence on 1 September 2013 until 30 April 2015 when, after her marriage, she moved into Bertie's house as her principal private residence. Tamara's house remained empty until the date of sale. On 12 November 2018 Tamara sold a sculpture at an auction for gross sale proceeds of 6,875 from which the auction house deducted commission of 12%. Tamara originally purchased the sculpture on 1 January 2011 for 4,530. On 29 September 2018 Tamara gifted 30,000 1 ordinary shares in Brava plc, a quoted trading company, to her son Ryan. On that date the shares were worth 189.000. Tamara had originally purchased 18,000 shares in Brava plc on 17 March 2012 for 79,200. She purchased a further 15,200 shares on 2 October 2014 for 33.440. Brava plc has a total issued share capital of 3,000,000 1 ordinary shares. On 9 February 2019 Tamara sold her classic motor car for its full market value of 28,500 to a friend. She bought the car on 12 November 2013 for 14,350. On 20 December 2018 Tamara sold four acres of land for 278,000. The four acres were part of a thirteen acre plot that she purchased in January 2014 for 730,000 The sale of the four acres was arranged by a local estate agent who charged a 2% fee for their professional services. The value of the remaining nine acre plot still owned by Tamara on 20 December 2018 was 1,080,000 Page 5 of 14 You also discover that Bertie disposed of some paintings on 18 June 2015 which give rise to a capital gains tax liability of 1,485. Bertie did not include the gains in his self- assessment tax return as his friend told him that paintings are wasting chattels and are exempt assets. He therefore believed that he had no capital gains tax liability to pay. As the amount of tax involved is small and it was back in 2015, Bertie has told you that he does not intend to disclose details of the sale to HMRC. Required (a) Explain why entrepreneurs' relief and gift relief is not available on the gift of Brava plc shares. (4 marks) (b) Calculate Tamara's capital gains tax liability for the tax year 2018/19. (21 marks) (c) Discuss how you should deal with the suggestion from Bertie that he does not intend to disclose details of the sale of antiques to HMRC. (5 marks) (d) Explain how the disposal of chattels are treated for capital gains tax purposes. (5 marks) Total: (35 marks) I Page 6 of 14 Taxpayer mes Capital gains tax computation - 2018/19 Not qualifying for ER Qualifying for ER Residential property Other assets Net chargeable gains 1 Less: Capital losses b/ III Less: AEA Taxable gains Capital gains tax Capital gains tax payable Tamara Mundy has made several capital disposals in the tax year 2018/19 and she has asked you to help her calculate her liability to capital gains tax. Tamara was born on 25 December 1985, is a UK resident, married Bertie in 2015 and has one son, Ryan. She works full-time for Torville Ltd, has some investment income and has estimated that her taxable income for 2018/19 will be 32,150. She has unused capital losses brought forward from 2017/18 of 11,450. Tamara has provided you with the following details: On 30 June 2018 Tamara sold the family home for 466,900 in Manchester. The house had been purchased by Tamara on 1 October 2001 for 139,155. Tamara has occupied the house as her main residence from the date of purchase until 31 August 2004 when she took off and went travelling overseas for four years. Whilst travelling she signed a five year contract to work in Wales (i.e. elsewhere in the UK) starting on 1 September 2008. The job provided living accommodation as part of her job Her house in the UK was therefore unoccupied between 1 September 2004 and 31 August 2013. She returned to occupy the house as her main residence on 1 September 2013 until 30 April 2015 when, after her marriage, she moved into Bertie's house as her principal private residence. Tamara's house remained empty until the date of sale. On 12 November 2018 Tamara sold a sculpture at an auction for gross sale proceeds of 6,875 from which the auction house deducted commission of 12%. Tamara originally purchased the sculpture on 1 January 2011 for 4,530. On 29 September 2018 Tamara gifted 30,000 1 ordinary shares in Brava plc, a quoted trading company, to her son Ryan. On that date the shares were worth 189.000. Tamara had originally purchased 18,000 shares in Brava plc on 17 March 2012 for 79,200. She purchased a further 15,200 shares on 2 October 2014 for 33.440. Brava plc has a total issued share capital of 3,000,000 1 ordinary shares. On 9 February 2019 Tamara sold her classic motor car for its full market value of 28,500 to a friend. She bought the car on 12 November 2013 for 14,350. On 20 December 2018 Tamara sold four acres of land for 278,000. The four acres were part of a thirteen acre plot that she purchased in January 2014 for 730,000 The sale of the four acres was arranged by a local estate agent who charged a 2% fee for their professional services. The value of the remaining nine acre plot still owned by Tamara on 20 December 2018 was 1,080,000 Page 5 of 14 You also discover that Bertie disposed of some paintings on 18 June 2015 which give rise to a capital gains tax liability of 1,485. Bertie did not include the gains in his self- assessment tax return as his friend told him that paintings are wasting chattels and are exempt assets. He therefore believed that he had no capital gains tax liability to pay. As the amount of tax involved is small and it was back in 2015, Bertie has told you that he does not intend to disclose details of the sale to HMRC. Required (a) Explain why entrepreneurs' relief and gift relief is not available on the gift of Brava plc shares. (4 marks) (b) Calculate Tamara's capital gains tax liability for the tax year 2018/19. (21 marks) (c) Discuss how you should deal with the suggestion from Bertie that he does not intend to disclose details of the sale of antiques to HMRC. (5 marks) (d) Explain how the disposal of chattels are treated for capital gains tax purposes. (5 marks) Total: (35 marks) I Page 6 of 14 Taxpayer mes Capital gains tax computation - 2018/19 Not qualifying for ER Qualifying for ER Residential property Other assets Net chargeable gains 1 Less: Capital losses b/ III Less: AEA Taxable gains Capital gains tax Capital gains tax payable
