Capital Gains Tax Flashcards
What are the exempt Assets for capital gains tax?
- Motor vehicles
- Main residence
- Cash
- ISA’s
- Corp bonds/gilt edged securities/debendutres/UK Gov securities
- NS&I Certificates
- Foreign Currencies for private use
- Receivables
- Trading inventories
- Prizes and betting winnings
- Wasting Chattels
- Non wasting (cost and sales proceed < 6,000)
What are the chargeable assets for CGT?
Land Buildings Goodwill Shares Chattels
Whats the pro-forma for chargeable gains?
Disposal proceeds LESS: Allowable selling costs LESS: Allowable expenditures Cost of acquisition Incidental cost of acquisition Additional capital enhancement exp.
= Chargeable gain
net gains and losses against each other to give Net chargeable gain.
Less Capital losses B/fwd
Less AEA
= Taxable gain
Less payment on account re residential prop disp.
= CGT payable
What is the date of payment?
31 January following the tax year.
What is the payment date for CGT on residential properties?
Within 30 Days of completion where capital gains tax is payable.
What are the capital loss relief options?
Current Year:
- Offset against current year gains
- Relieve as much as poss
- Unrelieved can c/fwd against future gains.
Brought forward:
- offset against net chargeable gain before the AEA
- Unrelieved carry f/wrd against future profits
Maximise relief:
-Losses and AEA should be offset in most beneficial manner i.e Vs gains on residential property in priority as these have a higher tax rate.
What are the CGT consequences of the event of death?
No capital gains or losses arise as a result of death.
Losses:
- Current year relief against gains
- Carry back 3 tx years on LIFO basis
- Allocate against net gains beforeAEA
What are the tax implications between spouse or civil partners?
No Gains or losses arise on transfer
Actual proceeds are ignored
Transferor is deemed to dispose of the asset at its acquisition costs
Transferee acquired asset at original cost.
How do you calculate a part disposal?
Total Cost x a/ (a+b)
where a = sale proceeds of part disposal
b = MV of remainder at time of part disposal
What’s the definition of small proceeds?
Small proceeds are less that £20,000.
When can an election be made for a small part disposal and what are the tax implications?
Election made where proceeds of the part disposal are:
1 < 20% of value of land and building before disposal
AND
2. Total of all land sale in tax year < £20,000
Implications:
* No chargeable disposal at the time of the part disposal
* Sale proceeds are deducted from the cost of the asset
* Gain effectively deferred until disposal of the remainder
of the asset
What is a negligible value claim?
Where an asset loses its value and becomes worthless, a claim for relief can be made.
What are the tax implications of a negligible value claim?
When does the deemed disposal take place?
- Deemed disposal of asset (proceeds negligible or nil)
- Immediately reacquired at the negligible value
- Capital loss crystalised.
The deemed disposal can be treated as taking place:
- at date of claim; or
- up to 2 years before the start of. the tax year in which the claim was made, if the asset was of negligible value at that time.
How do you calculate the gain on a complete disposal of a leasehold interest in a property?
Sales Proceeds
Less Cost
= gain
How do you calculate the sale of a leasehold interest in a property < 50 year remaining (short lease)?
Sale proceeds
Less cost
(Original cost x X/Y)
Gain
X = % for life of lease left on disposal date Y = %'s provided in exam for full lease at acquisition
If life is not a whole year (eg 24 years and 3 months) then apply the following:
% for 24 yrs + (3/12 (% for 25 - % for 24)
