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Compute the chargeable gain arising on the sale

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Reference no: EM132977976

Question - Mulligan plc is a UK resident company, manufacturing PPE for the health sector. In November 2020 the company sold its freehold warehouse premises.

Mulligan plc is currently operating from rented premises and is considering different options of reinvesting the proceeds from the sale of its warehouse.

Option 1 Reinvest the proceeds in Decca Ltd a logistics delivery company with accumulated trading losses of £110,000 and capital losses of £60,000.

Option 2 (i) Purchasing a freehold warehouse on a new commercial development for £875,000.

(ii) Purchasing a freehold warehouse on a city centre site for £700,000.

All of the above buildings have been, or will be, used for business purposes.

Sale of Freehold warehouse in November 2020 Sold freehold warehouse for £780,000. The building had been purchased in March 2003 for £180,000 and extended at a cost of £100,000 during May 2005. Mulligan plc incurred legal fees of £4,500 in connection with the purchase in 2003 and legal fees of £14,300 in connection with the disposal.

Indexation factors are as follows:

March 2003 (179.9)--> December 2017 0.549

May 2005 (192.2) --> December 2017 0.447

Required - Compute the chargeable gain arising on the sale of the freehold warehouse.

Reference no: EM132977976

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