3 - CGT Flashcards
Exempt assets of CGT
Car and residence
Personnel assets less than £6k
Compensation
Gambling
Asset with a life of less than 50yrs (wasting asset)
GILTS
Life policy
Calculation of CGT for residence if was not always living there
Total gain x (months occupied / months owned)
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?
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
What is CGT relief if person decides to let out part of their residential home?
Relief upto £40,000 for sole owner or £80,000 for joint owners and exemptions applies to part occupied by owner
Chattels
Tangible moving assets w.g. Jewellery, antiques, books
CGT exemption amount for chattels and what if exceeds the exemption?
£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
Two forms of CGT deferred consideration (ascertainable and unascertainable)
Ascertainable - amount received is fixed
Unascertainable - amount received is not fixed and can often depend upon certain conditions (contingent consideration)
Do you pay CGT when disposing of an asset to spouse or civil partner?
No, will pay CGT when spouse disposes or asset and gain calculated by using value when the asset was originally purchased by partner
Do you pay CGT if split then transfer asset?
No if split and transferred to partner in same tax year
Yes if split and transferred to partner in different tax years
CGT rule for if separate from wife in same and different tax year after split
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
Disposing of an asset at arms length or not at arms length
At arms length - normal transaction with no relationships
Not at arms length - close connection between seller and purchaser or asset
How do HMRC avoid not at arms length transactions avoiding CGT?
Will use market value of asset at time of transaction
Do you pay CGT on shares paid from employer on payslip?
No, class as being disposed of before receiving
Where part of an asset is getting disposed what is the acquisition cost?
Proceeds of the part disposed / (proceeds of part disposed + market value of part retained)
5 Steps for calculating the CGT
- Determine proceeds and deduct purchase cost
- Deduct purchasing, enhancement and selling costs
- Set off allowable losses
- Deduct annual exemption amount of £12,300
- Tax the gain
CGT surcharge for second homes?
8% surcharge
Carrier interest
compensation earned by investment managers on the performance of their fund. Has a CGT surcharge of 8%.
What date is CGT payable? What is the exception for and when is this paid?
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
Business asset disposal relief
Reduces CGT by 10% upto £1m
Conditions of business asset disposal relief
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
Gift holdover relief
When gift something but new owner pays CGT on this asset when disposed of by them based upon the donors base cost
Gift holdover relief rules
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
Business asset rollover relief
Can claim relief if sell an asset and buy a replacement asset deferring payment of CGT until new asset is sold
Business asset rollover relief rules
Must be purchased one year before or 3 years after disposal of old asset
Incorporation relief
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
Reinvestment relief into EIS
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
Reinvestment relief into SEIS shares
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.
No gain no loss disposal for CGT
When initial value is used for CGT disposal not the value when transferred and received
What costs are deductible from CGT or income tax for a property purchase and sale?
CGT
- costs associated with the purchase and enhancements to the property
Income tax
- Maintenance and insurance
When is CGT due?
31st Jan in at end of current tax yr
