Calital Tax Flashcards
What is the primary legislation governing Capital Gains Tax in the UK?
The primary legislation is the Taxation of Chargeable Gains Act 1992 (TCGA 1992).
What is a chargeable gain?
A chargeable gain is the profit made on the disposal of a chargeable asset, subject to Capital Gains Tax.
What is a chattel for capital taxation purposes?
A chattel is a tangible, moveable property, such as antiques or artwork, which may be subject to CGT depending on the sale value.
What is the annual exempt amount for individuals in 2024/25 for CGT?
The annual exempt amount for individuals is £3,000 in 2024/25.
What is the difference between business asset disposal relief and private residence relief?
Business Asset Disposal Relief applies to business assets and reduces CGT to 10%; Private Residence Relief exempts gains on a qualifying main residence.
How are gains on development land typically taxed?
Gains on development land are usually taxed as capital gains unless the activity is considered trading, in which case it may be subject to income tax.
What is the main difference between CGT and IHT?
CGT is charged on gains when an asset is disposed of, whereas IHT is charged on the value of the estate upon death or certain lifetime transfers.
Describe how you calculated a CGT liability in a past case.
I assessed the acquisition and disposal value, adjusted for allowable costs and reliefs, and applied the appropriate tax rate to the net gain.
What key exemptions or reliefs did you consider in your valuation for CGT purposes?
I considered Principal Private Residence Relief, Business Asset Disposal Relief, and any enhancement expenditure or incidental costs of sale.
How did you ensure your CGT valuation met HMRC standards?
I followed RICS Valuation – Global Standards (Red Book), ensuring assumptions, market value basis, and full documentation were included.
Describe a situation where you provided advice regarding CGT.
I advised on the valuation of a mixed-use property, identifying which elements were subject to CGT and advised on relief eligibility.
How did you handle uncertainty in valuation for CGT purposes?
I adopted the appropriate assumptions with sensitivity analysis and clearly documented uncertainties, supported by comparable evidence.
What professional considerations are key when advising on CGT valuations?
Objectivity, market evidence, relevant reliefs, tax legislation, and clear reporting are essential for providing sound professional advice.
What factors might trigger an IHT charge in relation to real estate?
Lifetime transfers into trusts, gifts made within 7 years of death, and estates above the nil rate band may all trigger an IHT charge.
What is the nil rate band for IHT in 2024/25?
The nil rate band remains at £325,000 in 2024/25.
What is the Residence Nil Rate Band (RNRB)?
An additional IHT allowance for passing a qualifying residence to direct descendants, currently up to £175,000.
What valuation basis is used for IHT?
Market value at the date of death, defined as the price the asset might reasonably fetch in an open market transaction.
Have you ever completed a Section 160 IHT valuation?
Yes, I have prepared an IHT valuation under Section 160 IHTA 1984 using market evidence and RICS guidance.
What challenges have you faced when advising clients on CGT or IHT matters?
Challenges include complex reliefs, mixed-use properties, and managing expectations during valuation under tight deadlines.
What steps do you take when advising on asset structuring for tax efficiency?
I work with tax advisors to consider trust structures, asset segmentation, and eligibility for available reliefs.
