3 - CGT

Question 1

Exempt assets of CGT

Answer 1

Car and residence

Personnel assets less than £6k

Compensation

Gambling

Asset with a life of less than 50yrs (wasting asset)

GILTS

Life policy

Question 2

Calculation of CGT for residence if was not always living there

Answer 2

Total gain x (months occupied / months owned)

Question 3

If someone owns 2 homes how long do they have to elect one as their main residence? Can this be backdated and if so for how long? What if no election is made within 2yrs? How many exemptions can a married couple have?

Answer 3

2yrs from acquisition

Can change and be backdated upto 2yrs

If no election is made then HMRC decides

Married couple can claim 1 exemption unless genuinely live separately

Question 4

What is CGT relief if person decides to let out part of their residential home?

Answer 4

Relief upto £40,000 for sole owner or £80,000 for joint owners and exemptions applies to part occupied by owner

Question 5

Chattels

Answer 5

Tangible moving assets w.g. Jewellery, antiques, books

Question 6

CGT exemption amount for chattels and what if exceeds the exemption?

Answer 6

£6k for sole owned and £12k for jointly owned chattels

If goes over then charged the lower of 5/3rds over £6k or the actual gain

Question 7

Two forms of CGT deferred consideration (ascertainable and unascertainable)

Answer 7

Ascertainable - amount received is fixed

Unascertainable - amount received is not fixed and can often depend upon certain conditions (contingent consideration)

Question 8

Do you pay CGT when disposing of an asset to spouse or civil partner?

Answer 8

No, will pay CGT when spouse disposes or asset and gain calculated by using value when the asset was originally purchased by partner

Question 9

Do you pay CGT if split then transfer asset?

Answer 9

No if split and transferred to partner in same tax year

Yes if split and transferred to partner in different tax years

Question 10

CGT rule for if separate from wife in same and different tax year after split

Answer 10

if separate from wife and an asset is transferred to their partner afterwards but in same tax year then pay no CGT but if in new tax yr the pay CGT

Question 11

Disposing of an asset at arms length or not at arms length

Answer 11

At arms length - normal transaction with no relationships

Not at arms length - close connection between seller and purchaser or asset

Question 12

How do HMRC avoid not at arms length transactions avoiding CGT?

Answer 12

Will use market value of asset at time of transaction

Question 13

Do you pay CGT on shares paid from employer on payslip?

Answer 13

No, class as being disposed of before receiving

Question 14

Where part of an asset is getting disposed what is the acquisition cost?

Answer 14

Proceeds of the part disposed / (proceeds of part disposed + market value of part retained)

Question 15

5 Steps for calculating the CGT

Answer 15

1. Determine proceeds and deduct purchase cost
2. Deduct purchasing, enhancement and selling costs
3. Set off allowable losses
4. Deduct annual exemption amount of £12,300
5. Tax the gain

Question 16

CGT surcharge for second homes?

Answer 16

8% surcharge

Question 17

Carrier interest

Answer 17

compensation earned by investment managers on the performance of their fund. Has a CGT surcharge of 8%.

Question 18

What date is CGT payable? What is the exception for and when is this paid?

Answer 18

31st Jan after tax he gain was made

Unless non-exempt UK resi. property then the CGT needs to be reported and paid within 60days of completion date

Question 19

Business asset disposal relief

Answer 19

Reduces CGT by 10% upto £1m

Question 20

Conditions of business asset disposal relief

Answer 20

Must have been owned for 2yrs from disposal

Asset must have been used for business purposes

Must have ‘qualifying interest’ in business which is 5% and is employee or director

Question 21

Gift holdover relief

Answer 21

When gift something but new owner pays CGT on this asset when disposed of by them based upon the donors base cost

Question 22

Gift holdover relief rules

Answer 22

Between individuals:
- Only given if donor and donee claim relief
- Must have atleast 5% voting rights in company

Transfer through trust:
- only donor needs to claim relief
- must be resident in the UK

Question 23

Business asset rollover relief

Answer 23

Can claim relief if sell an asset and buy a replacement asset deferring payment of CGT until new asset is sold

Question 24

Business asset rollover relief rules

Answer 24

Must be purchased one year before or 3 years after disposal of old asset

Question 25

Incorporation relief

Answer 25

An unincorporated business is transferred to a limited company in exchange for shares in that company so defers chargeable gain until shares are disposed of

Question 26

Reinvestment relief into EIS

Answer 26

Can be claimed when a disposal of an asset is reinvested into EIS and defers payment of CGT until disposal of shares. Can be done 1yr before or 3yrs after disposal of asset

Question 27

Reinvestment relief into SEIS shares

Answer 27

When an asset is disposed of and invested into SEIS, gains are not deferred. 50% of reinvested returns are exempt totally and 50% of gains are chargeable for CGT.

Question 28

No gain no loss disposal for CGT

Answer 28

When initial value is used for CGT disposal not the value when transferred and received

Question 29

What costs are deductible from CGT or income tax for a property purchase and sale?

Answer 29

CGT
- costs associated with the purchase and enhancements to the property

Income tax
- Maintenance and insurance

Question 30

When is CGT due?

Answer 30

31st Jan in at end of current tax yr