3 - Capital Gains Tax (A & B) Flashcards
A Disposals B Disposal consideration and valuation
What is the first step to working out a capital gain or loss?
Disposal proceeds less the acquisition cost.
For example, if you bought a painting for £5,000 and sold it later for £25,000, you’ve made a gain of £20,000 (£25,000 minus £5,000).
How is an asset valued for CGT purposes it was acquired before 1 April 1982?
Market value at 31 March 1982
What are the 4 ways in which you can dispose of an asset?
- Sell it
- Give it away as a gift, or transfer it to someone else
- Swap for something else
- Receive compensation for it - like an insurance payout if it’s been lost or destroyed
How is the date of disposal arrived at?
Date the contract of sale became binding, not the date the money was actually exchanged
What is the CGT treatment on sales and transfers between spouses?
CGT exempt, unless you separated and did not live together at all in that tax year, or if you gave assets away for them to sell for their business.
Even though transfers and sales between spouses are CGT exempt, when could a gain still arise?
When and if the spouse who received the asset realises a gain at a future date
How is CGT liability distributed between spouses on the sale of property in these circumstances:
1. Joint tenants
2. Tenants in common
- Equal share
- Unequal share
Is CGT charged on death?
No
What is a disposal not at arm’s length?
Not a close connection, friends for example.
Arms length might be father and daughter.
How is an asset valued when disposing not at arm’s length?
Market value
Deferred consideration can be ascertainable or un-ascertainable. What does this mean?
ascertainable = amount to be receieved is fixed
un-ascertainable = amount is not fixed
How do the valuations of assets differ when calculating for CGT and IHT?
CGT = asset valued
IHT = loss to the estate valued
What is the valuation basis for a gift for CGT purposes?
Market value
