ACCA Advanced Taxation (ATX) Practice Exam

When calculating the chargeable gain on an asset sold after Small Business Asset (SBA) relief, is land included in the proceeds and cost figures?

1. Yes, it is

2. No, it is excluded

3. Only in the cost figure

4. Only in the proceeds figure

The correct answer is: Yes, it is

When calculating the chargeable gain on an asset sold after Small Business Asset (SBA) relief, it is important to recognize that land is indeed included in both the proceeds and cost figures. This inclusion is based on the premise that for the purpose of determining chargeable gains, all relevant assets that are disposed of in a qualifying business context must be accounted for. SBA relief is aimed at encouraging investment in small businesses, and thus, when an asset is sold, the full scope of the asset, including land, remains pertinent in the taxation calculation. The proceeds represent the total amount received from the sale, while the cost figure reflects the initial investment in the asset, which encompasses costs directly related to the acquisition of the land. Therefore, disregarding land would lead to an inaccurate assessment of gain or loss for tax purposes. Including land in these calculations ensures that all aspects of the asset's value are properly considered, which is essential for achieving an accurate and fair tax treatment.