Taxation of the unincorporated business for ATX (UK) - part 4: self-test answers

Test your understanding: answers

(1). Statement A is false.
On a transfer of a going concern it is still necessary to charge VAT on a new building (ie one that is less than three years old) and on any building where an option to tax has been made. VAT need not be charged in these circumstances if the purchaser opts to tax the building.

Statement B is false.
Where a business is sold to a connected person there will still be capital allowances balancing adjustments unless the vendor and the purchaser make a succession election.

(2). Baxter’s base cost in the shares acquired

 £ 

Market value of the assets sold in exchange for shares

700,000

 

Incorporation relief (£280,000 x £700,000/£920,000)

(213,043)

 

Base cost of the shares

486,957

 

(3). Three possible reasons for the non-availability of business asset disposal relief

  • Warhol may not have owned at least 5% of WG Ltd, such that it was not his personal company, throughout the two years ended 1 June 2024.
  • WG Ltd may not have been a trading company or the holding company of a trading group throughout the two years ended 1 June 2024.
  • Warhol may already have made gains qualifying for the relief in excess of the lifetime limit of £1,000,000.

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