OPPA is the controlling shareholder and managing director of GANGNAM Ltd, un unquoted trading company that provides support services to the oil industry
OPPA disposed of the following assets during the tax year 2009-10
1. On 8 April 2009 OPPA sold five acres of land to GANGNAM Ltd for £ 260,000 which was the market value of the land on that date. The land had been inherited by OPPA upon the death of her mother on 17 January 2003, when the land was valued at £182,000. OPPA’s mother had originally purchased the land for £137,000
2. On 13 august 2009 OPPA made a gift of 5,000 £1 ordinary shares in SINGLELADIES plc, a quoted trading company to her sister. On that date the shares were quoted on the stock exchange at £7.40-£7.56 with recorded bargains of £7.36, £7.38 and £7.60
OPPA had originally purchased 1,000 shares in GENTLEMEN plc on 8 July 2003 for 18,200. On 23 November 2003 PSY Plc was taken over SINGLELADIES Plc. OPPA received five £1 ordinary shares and two £1 preference shares in SINGLELADIES plc for each £1 ordinary share held in GENTLEMEN plc. Immediately after the takeover each £1 ordinary share in SINGLELADIES plc was quoted at £3.50 and each £1preference shares was quoted at £1.25
Entrepreneurs’ relief and hold over relief are not available in respect of this disposal
3. On 22 March 2010 OPPA sold 40,000 £1 ordinary shares in GANGNAM Ltd for £280,000. She had originally purchased 125,000 shares in the company on 8 June 2002 for £142,000 and had purchased a further 60,000 shares on 23 May 2004 for £117,000. GANGNAM Ltd has a total share capital of 250,000 £1 ordinary shares. OPPA has made no previous disposals eligible for entrepreneurs relief
•Identify chargeable assets (4.1)
Hint: Advice Mr. OPPA all assets that are regarded chargeable assets
•Calculate the gains chargeable to CGT
Hint: Explain why OPPA’s disposal of 40,000 £1 ordinary shares in GANGNAM Ltd on 22 March 2010 qualifies for entrepreneurs’ relief.
•Calculate tax payable in respect of capital gains
Hint: Calculate OPPA’s gains tax liability for the tax year 2009-10, and state by when this should be paid.
7 answers