Annual exempt amount: example
The exempt amount for the year 2004-05 is £8,200. E has a chargeable gain of £10,000,allowable losses for the year of £7,000, losses brought forward of £15,000, a Section 77gain of £2,000 as a settlor of a UK-resident trust and a Section 87 gain of £6,000 as abeneficiary of non-resident trust.
First identify those chargeable gains from which personal losses may be deducted anddeduct the allowable losses of the year.
|Chargeable gains from which personal losses may be deducted (10,000 + 2,000)||12,000|
|less Allowable losses of year||7,000|
Next, determine the amount of losses brought forward which can be used in the year. Inaccordance with CG18034, this amount is calculated by first adding to the £5,000 thelesser of
- the annual exempt amount of £8,200, and
- the Section 87 gain of £6,000 (the Section 2(5)(b) amount - personal losses may not be deducted from this attributed gain)
to arrive at the amount of the adjusted net gains, and then subtracting theannual exempt amount from the adjusted net gains.
|Gains from which personal losses may be deducted less losses of the year||5,000|
|add Section 87 gain (less than AEA)||6,000|
|Adjusted net gains||11,000|
|less Annual exempt amount||8,200|
|Losses brought forward which can be used||2,800|
Now perform the calculation set out in CG18033
|less Losses of the year||7,000|
|3,000||Losses brought forward||15,000|
|less Losses brought forward to be used||2,800||less Losses used||2,800|
|200||Losses carried forward||11,200|
|add Attributed gains from which personal losses may be deducted||2,000|
|add Section 87 attributed gains||6,000|
|less Exempt amount||8,200|
If the Section 87 gains had exceeded the annual exempt amount, the losses brought forward would have been deducted as far as possible (after losses of the year) from chargeable gains of £12,000 and the balance carried forward. The annual exempt amount would then go wholly against the Section 87 gains.
In this example the taxable amount is nil so that it is not necessary to consider the effect of taper relief. Had the S77 attributed gain been £20,000, the full £15,000 losses brought forward would have been deducted; £3,000 from the personal gain and £12,000 from the attributed S77 gain.