8. Calculating Capital Gains Tax Flashcards
When does capital gains tax arise?
When there is a chargeable disposal by a chargeable person of a chargeable asset.
What is a chargeable disposal?
It occurs on the sale or gift of an asset, or if an asset is lost or destroyed.
When are gifts exempt from capital gains tax?
Gifts on death and gifts to charities.
What is a chargeable person?
An individual resident in the uk will be chargeable to CGT in the UK on worldwide assets.
What is a chargeable asset?
All assets are chargeable unless exempt
What assets are exempt to capital gains tax?
- Cars
- UK gov stocks (Guilts)
- Principle private residence
- Wasting chattels (<50 years)
- Non-waisting chattles (bought and sold for
What are incidental costs of sale?
Costs incurred necessary for the sale to take place.
What is enhancement expenditure?
Expenditure to increase the value of the asset
When is capital gains tax payable?
On the 31st January following the end of the tax year.
What are the capital gains tax rates?
BRB - 10%
Anything above BRB - 20%
What is the annual exempt amount for CGT?
£12,000
It can only reduce gains down to nil, it cannot create a loss or be carried forward.
How must capital gains losses be offset?
In full against current year gains, then carried forward to offset future gains. Losses should only be used to reduce gains down to the AEA.
How do you calculate a part disposal?
Original cost X A/(A+B)
A= market value of part disposed of (gross proceeds) B= market value of remainder of asset
Who are connected people?
- Brothers / sisters + spouses
- Children + spouses
- Grandchildren + spouses
- Parents + spouses
- Grandparents + spouses
- Business associates + spouses
What happens when you dispose to a connected person?
It must be made at market value
