3 - Capital Gains Tax (G & H)

Question 1

For calculating the chargeable gains on shares for CGT purposes, disposals of such shares, or units in unit trusts, are identified with acquisitions in which order?

Answer 1

1. acquisitions on the same day;
2. acquisitions within the following 30 days; and
3. acquisitions in the share pool: this totals all acquisitions except those made on the same day or the following 30 days.

Question 2

Why do disposals need to be identified with acquisitions “within the following 30 days”?

Answer 2

To prevent ‘bed and breakfasting’

Question 3

Which share acquisitions are included in the share pool when calculating chargeable gains for CGT purposes?

Answer 3

All acquisitions except those made on the same day or the following 30 days.

Question 4

Why is there no extra acquisition cost when it comes to bonus (scrip) shares?

Answer 4

Because they are issued for free

Question 5

What is a bonus or scrip issue of shares?

Answer 5

An offer of free additional shares to existing shareholders, from accumulated profits

Question 6

When an individual is already a shareholder and subscribes for more shares under a rights issue, there is usually an additional acquisition cost. Where are the shares and costs placed for acquisition identification purposes?

Answer 6

Share pool

Question 7

A scrip dividend is also known as what?

Answer 7

Stock dividend

Question 8

What is a scrip dividend?

Answer 8

Dividends offered as additional shares, not cash

Question 9

Shares acquired by means of a scrip dividend, are usually treated as new acquisitions for identification purposes. True or false?

Answer 9

True

Question 10

In which two ways can chargeable gains be declared?

Answer 10

1. Self-assessment (most popular)
2. HMRC’s real time CGT service (though self-assessment will still be required)

Question 11

If individuals who have made gains that exceed the annual exempt amount do not receive a tax return to complete, how soon should they tell HMRC about the gains?

Answer 11

Within six months of the end of the tax year of disposal

Question 12

Capital losses do not need to be reported to HMRC. True or false?

Answer 12

False - both gains and losses should be reported

Question 13

When is CGT due to be paid?

Answer 13

31 January following the end of the tax year when the
gain was made.

Question 14

If a disposal is being made towards the end of the tax year, it may be worth delaying it until after 5 April, WHY?

Answer 14

Because this will defer the due date for payment by a full year.

Question 15

How soon should a payment on account of CGT be paid, after completion of a UK residential property (where not exempt as a private residence)? And how is payment made?

Answer 15

Within 60 days.

This is done by making an online property report.

Question 16

The payment on account provisions also apply to trusts. True or false?

Answer 16

True

Question 17

Nicole makes a gain (not in respect of residential property) on 1 July 2023 on which CGT is payable. The gain has to be included in her tax return for 2023/24. When is the CGT due to be paid?

Answer 17

31 January 2025

Question 18

Graham completed the disposal of a residential property on 10 April 2023, realising a chargeable gain of £100,000. The property had always been let out.

When was the payment on account due plus any additional tax?

Answer 18

Payment on account by 9 June 2023 (within 60 days of completion)

Any additional tax due on 31 January 2025 (the 31 January following the end of the tax year).