Calculate and explain the potential capital gains tax liability on the proposed disposal of Copy It.

Advanced personal taxation

It is September 2020. Your firm has recently been approached to act in taxation matters for Mrs Porter, a higher rate taxpayer.

For many years Mrs Porter has run a stationery shop called ‘Copy It’. She set up the business from scratch and has always operated the business as a sole trader. However, she is finding running the business a struggle and has decided to accept an offer to sell it. Details of the business assets and prospective offer are provided in the Appendix. Mrs Porter has asked you to quantify the capital gains tax charge that would arise on the disposal.

Mrs Porter is not sure if she wishes to retire yet and is considering an offer to go into partnership with her sister. She and her sister are thinking of buying a property in Dorset, which they would run as a guest house. With this in mind, Mrs Porter has asked for information regarding rollover relief and, should she change her mind, she would also like to know about capital gains tax deferral into EIS investments.

Required:

1. Calculate and explain the potential capital gains tax liability on the proposed disposal of Copy It.

2. Prepare notes explaining the reliefs available to Mrs Porter for exempting/deferring the gain.