Question 2

During the year ended 5 April 2022 Eric (a higher rate taxpayer) disposed of the following asset:

(a) A small cottage in Devon which he had inherited in August 1988 when its value was 20,000 and he subsequently used as a holiday cottage for his own use. In September 1989 he had added a conservatory to the property at a cost of 3,500. Eric did not use the cottage as his main residence at any stage, and he sold it for 225,000 in July 2021. Eric incurred legal and estate agents fees of 1,500 on the disposal of the property.

(b) A vacant 8-hectare plot of land for 52,800 in February 2022. The plot was part of a 12- hectare plot originally bought by Eric for 31,700 in October 1988 and not used by him as a business asset nor is it associated with a residential property. Incidental costs of disposal were 1,300. The remaining 4-hectare plot was valued at 22,000 in February 2022.

Eric sold a motor car for 18,400. The car was purchased in January 2012 for 17,800.

(d) Eric sold an antique vase for 9,000. The antique vase had been purchased in January 2014, for 5,000.

Required:

(a) Calculate Erics capital gain for the year of assessment 2021/22 after the annual exemption and the amount of capital gains tax payable by Eric for 2021/22, stating when the tax must be paid.

Corporation Tax Financial Year FY2021 FY2020 FY2019 FY2018 FY2017 Main ratet 19% 19% 19% 19% 19% Patent box (effective rate) 10% 10% 10% 10% 10% R&D SMEs payable credit 14.5% 14.5% 14.5% 14.5% 14.5% R&D expenditure credit 13% 13% 12% 12% 11% * The main rate for FY2022 will be 19% # The main rate for FY2023 will be 25%. However, a "small profits rate" of 19% will apply to companies with profits not exceeding 50,000. Companies with profits between 50,000 and 250,000 will be subject to the main rate, but reduced by a marginal relief. Lower rate Inheritance Tax Date of transfer Nil rate Rate on life- Rate bandt time transfers on death 6 April 2006 to 5 April 2007 0 - 285,000 20% 40% 6 April 2007 to 5 April 2008 0-300,000 20% 40% 6 April 2008 to 5 April 2009 0-312,000 20% 40% 6 April 2009 to 5 April 2012 0 - 325,000 20% 6 April 2012 to 5 April 2022 0-325,000 20% 40% Residence nil rate band for 2021-22 is 175,000 # Nil rate band and residence nil rate band both frozen until the end of tar year 2025-26 40% 36% Value Added Tax Standard rate 20% (from 4 January 2011) Reduced ratet 5% Registration threshold 85,000 (from 1 April 2017) Deregistration thresholdt 83,000 (from 1 April 2017) A temporary reduced rate of 5% applies to the hospitality and tourism sector between 15 July 2020 and 30 September 2021. This rate rises to 12.5% between 1 October 2021 and 31 March 2022 and then reverts to the standard rate of 20% as from 1 April 2022. * Thresholds frozen until April 2024 Summary of Tax Data 0% 0% Income Tax 2021-22 2020-21 TAX RATES AND BANDS Basic rate 20% 20% Higher rate 40% 40% Additional rate 45% 45% Basic rate limitt 37.700 37.500 Higher rate limit 150,000 150.000 Different tax rates and bands apply to the non-savings income of Scottish taxpayers (see below) * Basic rate limit frozen at 37,700 until the end of tax year 2025-26 Starting rate for savings Starting rate limit for savings 5,000 5.000 Personal savings allowance (basic rate taxpayer) 1,000 1.000 Personal savings allowance (higher rate taxpayer) 500 500 Dividend ordinary rate 7.5% 7.5% Dividend upper rate 32.5% 32.5% Dividend additional rate 38.1% 38.1% Dividend allowance 2,000 2.000 SCOTTISH TAX RATES AND BANDS Starter rate 19% 19% Basic rate 20% 20% Intermediate rate 21% 21% Higher rate 41% 41% Top rate 46% 46% Starter rate limit 2,097 2,085 Basic rate limit 12.726 12.658 Intermediate rate limit 31,092 30,930 Higher rate limit 150,000 150.000 * These tax rates and bands apply only to the non-savings income of Scottish taxpayers Summary of Tax Data PERSONAL ALLOWANCES 2021-22 2020-21 Personal allowancet 12.570 12,500 Marriage allowance 1.260 1.250 Blind person's allowance 2520 2.500 Married couple's allowance: Born before 6 April 1935 9.125 9,075 Minimum amount 3530 3,510 Income limit for basic personal allowance 100.000 100,000 Income limit for married couple's allowance 30.400 30.200 Personal allowance frozen at 12,570 until the end of tax year 2025-26 CAR AND FUEL BENEFIT Zero emissions 0% *1-50 g/km (depending upon electric range) 29-14% 2% -14% *51g/km to 54g/km 15% 15% *55g/km to 59g/km 16% 16% *60g/km to 64g/km 17% 17% *65g/km to 69g/km 18% 18% *70g/km to 74g/km 19% 19% *75g/km 20% 20% Each additional 5g/km +1% +1% Maximum charge 37% 37% Amount used in car fuel benefit calculation 24,600 24,500 * These percentages are 1% lower in 2021-22 and 2% lower in 2020-21 if the car was registered on or after 6 April 2020 CAPITAL ALLOWANCES Writing Down Allowance (WDA) Main pool of plant and machinery 18% Special rate pool of plant and machinery 6% 6% Annual Investment Allowance (AIA) 100% 100% AIA annual limit from 1 January 2016 200,000 200.000 First Year Allowances (FYAs) 100% 100% Structures and Buildings Allowances (SBA) 3% AIA annual limit temporarily raised to Im between 1 January 2019 and 31 December 2021 PENSION SCHEMES Annual allowance 40.000 40.000 Lifetime allowancet 1,073.100 1.073,100 Lifetime allowance frozen at 1.073,100 until the end of tax year 2025-26 18% 3% 2021-22 2020-21 120 184 967 170 967 120 183 962 169 962 12% 2% 12% 2% National Insurance Contributions CLASS 1 Lower earnings limit (weekly) Primary threshold (weekly) Upper earnings limit (weekly) Secondary threshold (weekly) Upper secondary threshold (weekly) Employee contributions Rate on earnings between primary threshold and UEL Rate on earnings beyond UEL Employer contributions Rate on earnings beyond secondary threshold Employment allowance CLASS 1A Rate CLASS 2 Weekly contribution Small profits threshold CLASS 3 Weekly contribution CLASS 4 Lower profits limit Upper profits limit Rate on profits between lower and upper limit Rate on profits beyond upper limit 13.8% 4.000 13.8% 4.000 13.8% 13.8% 3.05 6,515 3.05 6,475 15.40 15.30 9,568 50.270 9% 2% 9.500 50,000 9% 2% Capital Gains Tax 2021-22 2020-21 Standard ratet 10% 10% Higher ratet 20% 20% Business asset disposal relief rate 10% 10% Business asset disposal relief lifetime limit 1,000,000 1,000,000 Annual exempt amount 12.300 12.300 Taxable gains on the disposal of residential property are taxed at 18% and 28% + Annual exempt amount frozen at 12,300 until the end of tax year 2025-26