Capital Gains Tax Flashcards
Who is liable for capital gains tax?
UK residents - regardless of where they dispose of the property
Non-UK residents but only when disposing of UK land (commercial or residential)
COMPANIES DO NOT PAY CGT! Gains taxable at 19% company tax rate
What are wasting chattels for the purposes of CGT?
moveable property with life less than 50 years
eg. car, boat, watch, farm animals
What 5 assets are exempt from CGT?
- Shares in ISA
- Gilts (government bonds)
- Cash sterling
- wasting chattels
- non-wasting chattels worth less than £6000 (at time of disposition) - BUT shares are not chattel!
What 3 disposals are exempt from CGT?
- Transfer on death (probate value)
- Transfer between spouses
- Transfer to charity
How is the value of a property assessed when it is disposed to connected person or by gift?
If an asset is disposed of by gift or the transaction is with a
‘connected person,’ we use market value instead of the price that was paid to
calculate the proceeds of the sale.
What is the CGT-free uplift to probate value?
On a transfer on death the estate takes the property at market value at the time of death, aka probate value.
This means that if there has been a gain in property pre death, this is not calculated for future CGT on the property.
Eg - Niece inherits clock. Clock was 5000 when bought by Settlor. Worth 10000 on donor’s death. Niece sells clock for 10000 years later. NO CGT.
What is Private Residence Relief and how is it calculated?
PRR is an exemption relief and reduces capital gain.
Calculation:
Period of occupation divided by period of ownership
Multiplied by gain.
What are the deemed periods of actual occupation for the purposes of Private Residence Relief?
- Last nine months of ownership
- Any absence of three years
- Unlimited years where owner is abroad for employment
- Absence of four years for work elsewhere in UK
**BUT owner must move back to their property following absence to use the last three deemed occupations.
What is Replacement of Business Assets (Roll-over) Relief and when is it available?
Defer disposal of qualifying business assets IF reinvested in other qualifying assets - one year before or three years after.
ANY proceeds retained are chargeable.
Eg - sale of factory for £300,000 to buy factory for £250,000. CGT payable on £50,000
Who is Replacement of Business Assets Relief available for?
Sole traders, partnerships AND companies! The LOT!
What is the annual deduction for capital gains tax
£12,300
What is incorporation relief and when is it available?
When an individual transfers business or partnership interest as a going concern to a company.
Gain is deferred. Will be payable when individual disposes of the shares.
What is Enterprise Investment Scheme Reinforcement Relief and when is it available?
Defer payment on CGT by investing chargeable gain in shares of a qualifying unquoted trading company - part of Enterprise Investment Scheme (EIS).
WHEN? Up to 1 year prior to gain made, or 3 years following gain.
CGT due when shares disposed!
What is Business Asset Disposal Relief and in what 3 CIRCS is it available?
WHAT?
- Available on gains made by sale or gift of certain business assets.
- CGT payable at 10% (rather than 20% for higher rate) on qualifying gains.
- Lifetime limit of £1m
WHEN?
- All or parts of a trading business carreid on as sole trader/partnership for AT LEAST 2 YEARS
- Shares in trading company IF individual owns at least 5% ordinary shares in company AND was officer/employee for 2 years
- Assets owned by trading company for two years before disposal
What is hold over (gift) relief?
CGT tax relief for donor of a gift. When donee disposes of the gift they will pay the CGT owed by donor and CGT owned by donee.
