4.3 Taxation - Capital Gains Tax

Question 1

When may CGT be charged?

Answer 1

1) Disposal of chargeable asset
- Land sale
- Gift
- Swap
- To be compensated

2) Date of disposal
- Contracts exchanged + transaction is unconditional

3) CGT > Gain

Question 2

What may Seller deduct from CGT?

Answer 2

1) Costs + expenses of disposal
- Purchase
- Legal fees
- SDLT
- HMLR

2) Costs > Alterations/Improvements
- Improve value of property

3) Costs incurred
- Legal
- Estate agent
- Disbursement

=> Persons can deduct annual exempt allowance from total CGT each year

Question 3

When may Principal Private Dwelling House (PPDH) exemption apply?

Answer 3

Sale of home/principal private dwelling

• Grounds < 5,000 sqm
• Grounds > 5,000 sqm => Only CGT chargeable on excess (UNLESS additional land needed for reasonable enjoyment)

S owns at least one house > Must elect which house PPDH applies to
- Within 2 years of purchasing second property

Question 4

What are the exceptions to PPDH exemption?

Answer 4

S NOT lived in dwelling house as main/only residence throughout ownership period => Exemption still applies to;

• Last 9 months of ownership
• First 12 months of ownership
• Temporary absence period < 3 years
• Period S working outside UK (as employee)
• Period S prevented from living due to employment conditions < 4 years

S used property partly for business purposes => Exemption applies to part used for residential purposes

Question 5

When may Lettings Relief apply?

Answer 5

Part of property qualified for PPDH + 9 months => PPDH applies

Remainder => LR applies

• Capped at £40,000
• Landlord lived with Tenant

Question 6

What other exemptions apply to CGT?

Answer 6

Gift > Charity

Gift/Sale > Spouse/Civil Partner