Section A

Jonah, a retired deep-sea welder, sold an antique diving helmet (a non-wasting chattel) for £7,200 in December 2023. He had originally purchased it for £3,000.

What is the chargeable gain on the disposal of the diving helmet?

Answer options:

£4,200

£2,000

£1,200

£0

How to approach this question

Calculate the actual gain. Then calculate the maximum gain under the chattels rule: 5/3 x (Proceeds - £6,000). The chargeable gain is the lower of the two.

Full Answer

B.£2,000✓ Correct

The diving helmet is a chattel. Since cost < £6,000 and proceeds > £6,000, the marginal relief rule applies. Actual gain = £7,200 - £3,000 = £4,200. Maximum gain = 5/3 x (£7,200 - £6,000) = £2,000. The chargeable gain is the lower amount, which is £2,000.

Common mistakes

Forgetting to apply the 5/3 fraction or just using the actual gain.

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Practice the full ACCA TX — Taxation Practice Exam 3

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