2. Capital Gains tax

Question 1

What’s a capital gains planning advice for transfers between spouses

Answer 1

• use both AES
• use capital losses
• pay tax at lowest rate

Question 2

Describe sale of short lease
1. Less than how many years is a short lease
2. How do you calculate the allowable deduction of the short lease

Answer 2

1. Less than 50%
2. Cost x (% of life remaining at disposal date / % of life left at acquisition date)

Question 3

Descriptor what happens during a party disposal
1. What’s the allowable deduction calculation

Answer 3

Cost x A / A + B

A= MV of part disposed of
M = MV of the remainder

Question 4

What happens in a small part disposal
1. Is there a part disposal
2. What’s the calculation

Definition of small:

Land and building
Proceeds of part disposal are:
- less than what % of land before part disposal; AND
- total sale proceeds from land less than how much in a tax year

Other assets
Proceeds of part disposal are
- less than what % of value of asset before part disposal OR
- less than how much

Answer 4

No park disposal
Deduct sale proceeds from allowable expenditure

Definition of small

Land and building
Sale proceeds of part disposal are:
- less than 20% of land before part disposal ; AND
- total sale proceeds from land less than £20k in a tax year

Other assets:
Proceeds of part disposal are:
- less than 5% of value of asset
Before part disposal
- or less than £3,0000

Question 5

Disposal of shares by an individual
What’s the share identification rules:
(Matching rules)
- what day do you look at first
- what next amount of days you look at next at what basis
-what’s the last place you look at

Answer 5

Share indemnification rules:
- same day
- next 30 days LIFO basis
- share pool

Question 6

Disposal of shares
Valuation of quoted Shares and security
(Special rules : gift of shares in a plc)
= what of quoted price
= equation

Answer 6

Valuation of quotes shares and security
(Special rules: gift of shares in a plc)
= average quoted price
= (H+L) / 2

Question 7

What’s the share pool working for individuals

Answer 7

Total cost / total shares = disposal at average cost

Question 8

Takeovers
Allocate original cost to takeover consideration
Mixed proceeds : apportion cost based on values at takeover

Shares in a new company
- Allocated cost = what calculation
Consequences
Share for share exchange
- is there any capital gains tax at the time of takeover
- the allocated cost becomes what cost of new shares in a new share pool

Cash
- Allocated cost = what calc
Consequences
Part disposal at time of takeover
- what’s the chargeable gain =
- taxes at time of what

Qualifying corporate bonds
- allocated costs =
Consequence
Part disposal at time of takeover
- but not taxes at time of what
- chargeable gain =
- gain = what until QCBs disposed

When QCB disposed of:
- what gain becomes chargeable
- gain on QCBs = what

Answer 8

Shares in a new company
- allocated cost = ( takeover consideration / total takeover consideration ) x cost of total original shares
Consequences
Share for share exchanges
- no capital gains tax at the time of takeover
- the allocated cost becomes deemed cost of new shares in a new share pool

Cash
- allocated cost = (takeover consideration / total consideration ) x total cost of original shares
Consequences
Part disposal at time of takeover
- chargeable gain = takeover consideration of cash - cost of original shares of the cash amount
- taxed at time of takeover
- unless cash is ‘small’

Qualifying corporate bonds
- allocated costs = (takeover consideration / total takeover consideration ) x total cost of original shares
Consequence
Part disposal at time of takeover
- but not taxed at time of takeover
- chargeable gain = takeover consideration of QCB - original cost of shares value of the QCB
- gain = frozen until QCBs disposed

When QCBs disposed of:
- frozen gain becomes chargeable
- gain of QCBS = exempt

Question 9

EIS / SEIS reinvestment relief can be claimed against what gains, but plan to:
• Offset against ‘Gains not/are qualifying for BADR/IR’ in preference to ‘Gains not/are qualifying for BADR/IR,
and
Ensure you fully utilise what losses,
and Preserve the what

Answer 9

EIS / SEIS reinvestment relief can be claimed against remaining gains, but plan to:
• Offset against ‘Gains not qualifying for BADR/IR’ in preference to ‘Gains qualifying for BADR/IR,
and
Ensure you fully utilise capital losses b/f, and Preserve the AEA

Question 10

Stamp taxes
Describe Stamp duty and and stamp duty reserve tax
1. Payable by
2. Based on
3. Rate
4. Payable during takeovers and reconstructions?
5. Are the following assets payable
- government stocks
- most company loan stock
- unit trust
-AIM shares

Answer 10

Stamp duty and stamp duty reserve tax
- payable by purchaser
- based on consideration paid on transfers of shares
- 0.5% rate
- not payable during takeovers and reconstructions
- no

Question 11

Stamp duty land tax
1. Payable by
2. Based on
3. Rate for commercial property

Answer 11

1. Purchaser
2. Value of property and land transferred in uk
3. Upto 5% for commercial property

Question 12

Example of exempt transfers of both stamp duty , stably Duffy reserve tax and stamp duty land tax

Answer 12

• gifts
• divorce arrangements
• variation of a will
• transfers between 75% companies