19. Computation of gains and tax payable

Question 1

What disposals aren’t chargeable? (2)

Answer 1

• gifts to charities

- disposal on death

Question 2

What assets aren’t classed as chargeable assets? (10)

Answer 2

• cash
• main residence
• motor cars
• gilt edged securities and qualifying corporate bonds
• NS&I certificates/premium bonds
• Prizes and betting winnings
• Assets held in ISAs
• Trading inventory
• Receivables
• Certain types of chattels

Question 3

What is the proforma for a chargeable gain/loss on an individual disposal?

Answer 3

Disposal proceeds X
Allowable selling costs (X)

Net disposal proceeds X
Allowable expenditure X
Cost of acquisition X
Incidental costs of acquisition X
Add. enhancement expenditure X
(X)

Chargeable gain/loss

Question 4

What changes in a chargeable gains tax proforma if the asset is gifted (in sale or in acquisition)

Answer 4

You exchange the price of sale or acquisition for market value at said date

Question 5

What is the overall chargeable gains tax computation?

Answer 5

Net chargeable gains for tax year X
Annual exempt amount (X)
                                   X
Capital losses brought forward (X)
Taxable gains                  X
CGT liability at relevant rate    X

Question 6

What is the annual exempt amount for 19/20?

Answer 6

12,000

Question 7

What are the rates of capital gains tax?

Answer 7

Basic rate band - 10%
Above this - 20%
(deal with income tax first and keep in separate comps.)

For second homes or investment homes, add 8% to both bands.

Question 8

When is CGT due? How is it paid?

Answer 8

Paid in full on 31st Jan following year

Question 9

How do you deal with residential property on a CGT comp? (3)

Answer 9

• taxed differently (8% higher)
• seperate columns
• more beneficial to use AEA against property first as taxed higher.

Question 10

What needs to be considered when planning taxing capital gains? (3)

Answer 10

• Delay some disposals until next tax year to allow AEA and cash flow advantages
• Disposals more tax beneficial if broken down into pieces
• Sell more assets in years where income is lower to benefit from lower 10% tax.

Question 11

How do you tackle a capital gains question? (5)

Answer 11

• Calculate individual gains/losses
• Calculate net chargeable gains for the year (years gains - losses)
• Take off AEA
• Deduct losses brought forward
  Calculate CGT payable for year.