You should assume that today’s date is 15 December 2013.

Patrick and Emily Grant are a married couple. They have both always been resident in the United Kingdom (UK), being in the UK for more than 300 days each tax year up to and including the tax year 2012–13. However, following Patrick’s retirement, the couple decided to move overseas, purchasing an overseas property on 6 April 2013.

Patrick and Emily still have a house in the UK, and will stay there on the 105 days which they spend in the UK during the tax year 2013–14. Neither Patrick nor Emily works full-time, and neither of them will do any substantive work in the UK during the tax year 2013–14.

For the tax year 2013–14, Patrick will have taxable income of £7,200, and Emily will have taxable income of £46,400. During May 2013, Emily disposed of an investment, and the resultant chargeable gain fully utilised her annual exempt amount for the tax year 2013–14.

Patrick and Emily urgently need to raise £80,000 in order to renovate their overseas property, and have three alternative assets which can be sold. They would like to sell the asset which will provide them with the highest net of tax proceeds. The three alternatives are as follows:

Alternative 1 – Land
Patrick owns eight acres of land, and a neighbouring farmer has offered to buy this land for £92,000. Patrick originally purchased 14 acres of land on 2 May 2001 for £108,600 and he sold six acres of the land on 27 September 2006 for £37,800. The market value of the unsold eight acres of land as at 27 September 2006 was £52,700. The land has never been used for business purposes.

Alternative 2 – Unquoted shares
Emily owns 8,000 £1 ordinary shares in Shore Ltd, an unquoted trading company with a share capital of 100,000 £1 ordinary shares. Shore Ltd’s shares have recently been selling for £13·00 per share, but Emily will have to sell at £11·50 per share given that she needs a quick sale. The sale will be to an unconnected person. Emily subscribed for her shares in Shore Ltd at par on 1 June 2005, and she has been a director of the company since that date.

Alternative 3 – Quoted shares
Patrick and Emily jointly own 32,000 £1 ordinary shares in Beach plc, a quoted trading company. The shares are currently quoted on the Stock Exchange at £2·88. Patrick and Emily originally purchased 54,000 shares in Beach plc on 23 May 2003 for £75,600, but they had sold 22,000 shares on 17 November 2011 for £44,440.

The shareholding is less than 1% of Beach plc’s issued share capital, and neither Patrick nor Emily has ever been an employee or a director of the company.

Required:
(b) Assuming that the disposal is made during January 2014, advise Patrick and Emily Grant as to which of the three alternative disposals will result in the highest net proceeds after taking account of capital gains tax.

Notes:
1. For each of the three alternative disposals, your answer should be supported by a calculation of the capital gains tax due for the tax year 2013–14.

2. You are not expected to consider any possible tax planning. (12 marks)