S1 Ltd and S2 Ltd belong to the same capital gains group. In May 2020, S1 Ltd transferred a chargeable asset to S2 Ltd.

The original cost of this asset to S1 Ltd was £10,000 and its market value in May 2020 was £25,000. Indexation allowance of £1,350 would have been available in May 2020 If the asset had been sold outside the group. S2 Ltd (which prepares accounts to 31 December) leaves the group in March 2024.

(a) Calculate the degrouping gain arising on the departure of S2 Ltd.

(b) Explain the tax treatment of this gain.