Question 1

Section B: Case 3 - SteelForge Partners

Scenario: SteelForge Partners is a partnership manufacturing specialized alloys. On 1 May 2023, the partnership sold its old factory for £800,000, realizing a chargeable gain of £150,000. On 1 October 2023, they purchased a new factory for £700,000.

Question: Assuming a claim for Rollover Relief is made, what is the base cost of the new factory for Capital Gains Tax purposes?

Accepted Answer

Calculate the amount of proceeds NOT reinvested (£800k - £700k = £100k). This amount of the gain is immediately chargeable. The rest of the gain (£150k - £100k = £50k) is rolled over. Deduct the rolled-over gain from the cost of the new asset to find its base cost.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Rolling over the entire £150,000 gain and calculating a base cost of £550,000, ignoring the rule on non-reinvested proceeds.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 5

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