3. CGT Flashcards
How is deferred/contingent consideration taxed for CGT?
Taxable immediately
At future consideration, if known
If future consideration is not known, taxable gain is the market value of the right to receive the deferred consideration - additional gain/loss occurs if actual consideration is higher/lower
What is a ‘deemed disposal’ for CGT?
Arises on death - assets acquired by executors at market value at time of death
Purpose is to calculate acquisition cost for any future disposal
What are the key features of the CGT annual exempt amount? (4)
- Available to testator/administrator and trustees of bare trusts
- Other trusts get a lower amount (up to 50%)
- Cannot be carried forward to future years
- Not applicable to non-doms using remittance basis
What are CGT rules for spouses?
Transfers between spouses are not chargeable if living together, or for up to 3 years from separation
Acquisition value for second spouse is cost incurred by first spouse (i.e not value at time of transfer)
What are the 4 main asset groups exempt from CGT?
Chattels sold for <£6k each
Qualifying corporate bonds & UK gilts
Gains on qualifying life assurance policies (original owner)
Tangible movable property with expected life <50 years (wasting assets)
What are the rules around electing a main residence when somebody owns 2+ homes? (3)
Only one property can be main residence
Have 2 years to elect one from the acquisition date of the 2nd
Spouses living together can only claim one between them
What are the periods of absence that are ignored for PRR? (7)
- First year from acquisition to moving in (2yr if due to building work or failure to sell previous main residence)
- Last 9 months of ownership
- Any period pre April 1982
- Any period whilst in job-related accommodation
- Other periods between periods of main residence:
- Any periods totaling 3 years
- Up to 4 years due to employment elsewhere in UK
- Any period whilst working abroad
Under what circumstances (of the property) does PRR not apply? (3)
- To any part of the property used wholly for business
- To any part that is let
- If the purpose of buying the property is to sell at a profit
When does Letting Relief apply for CGT and how much is it?
Owner must be in shared occupation of property with tenant.
Relief is equal to lower of:
i) amount received as PRR
ii) £40k for each owner
iii) value of chargeable gain made for period of let
What is the calculation for CGT?
Disposal proceeds, less:
- purchase price
- purchase & disposal costs
- cost of capital improvements
- capital losses (other disposals or b/f from prior yrs)
- annual exempt amount
Gain added to top slice of income tax
How can capital losses be utilised? (2)
Offset gains of other disposals in tax year
Any residual losses carried forward (not back)
Key features of Business Rollover Relief? (3)
Trading company sells business assets to buy new business assets
New assets must be purchased 1 year before or 3 years after disposal
Relief = lower of gain or amount reinvested
What assets can be subject to CGT hold-over relief? (4)
- Business assets
- Shares in unlisted company
- Agricultural property
- Assets subject to immediate IHT charge
Gain deferred until recipient disposes
Key features of Reinvestment Relief?
Any gain reinvested into EIS 1 year before or 3 years after disposal
Gain deferred until sale of EIS shares
Key features of Business asset disposal relief (CGT)? Conditions (2), limit (2), rate.
Disposal of a business or business assets on cessation.
Assets must have been owned for 2 years
Must work in the business and own 5% of shares
£1m lifetime limit
Reduced CGT rate of 10%
External investors have £10m lifetime limit if shares held for 3 years
