CG17962 - Taper relief: business asset: different proportions of mixed use

In the event there have been different proportions of mixed use during any period of ownership, post 5 April 1998, those different apportionments should be applied to the relevant periods.

A property acquired on 1 April 1999 was disposed of on 1 April 2004. A gain of £50,000 arose on the sale.

During the relevant period of ownership, totalling five years, the property was used as follows

Year 1 - let.

Year 2 - used 60 per cent for the purposes of a trade carried on by the taxpayer and the remaining 40 per cent of the accommodation was let.

Years 3 to 4 - used wholly for the purposes of a trade carried on by the taxpayer.

Year 5 - used 80 per cent for the purposes of a trade carried on by the taxpayer and the remaining 20 per cent of the accommodation was let.

COMPUTATION

Firstly determine the distinct periods where the gain is to be treated as a gain on the disposal of a business asset, or a gain on a non-business asset

Wholly a business asset 2 years out of 5 years

Wholly a non-business asset 1year out of 5 years.

Secondly determine the period where there was mixed use of the asset. Apportion these mixed use periods

Business use within period of mixed use (1x0.6) + (1x0.8) = 1.4

Non-business use within period of mixed use (1x0.4) + (1x0.2) = 0.6

Thirdly, aggregate periods and apportion the gain

Total period as business asset 3.4/5 x £ 50,000 = £34,000

Total period as non-business asset 1.6/5 x £50,000 = £16,000.

Fourthly taper the separate gains

£34,000 of the gain qualifies for business asset taper appropriate to a qualifying holding period of 5 whole years. 25 per cent of this part of the gain will be included in the taxable amount: £8,500.

£16,000 of the gain qualifies for the non-business asset taper appropriate to a qualifying holding period of 5 whole years. 85 per cent of this part of the gain will be included in the taxable amount: £13,600.

The aggregated amount chargeable is £22,100.