Capital gains tax

Question 1

How is a taxable gain taxed if it straddles BRT and HRT?

Answer 1

It would be taxed proportionately at the lower and higher rates

Question 2

Are non-taxpayers able to offset their capital gain against any unused PA?

Answer 2

No

Question 3

Can the annual exemption be carried forward to future years?

Answer 3

No

Question 4

By what dates must CGT liabilities be paid?

Answer 4

31 January of the following tax year; or
within 60 days if a residential property sale

Question 5

What is the formula for calculating the gain on a main residence that is exempt from CGT?

Answer 5

(Period of actual or deemed occupation/period of ownership)*gain

Question 6

What situations are considered deemed occupation?

Answer 6

-First 24 months if completing construction or a delay in selling previous residence
-Any period of absence not exceeding three years (as long as sandwiched between actual occupation periods)
-Any period working away in the UK not exceeding four years (as long as sandwiched between actual occupation periods)
-Any period working abroad indefinitely (as long as sandwiched between actual occupation periods)
-Last nine months

Question 7

What is lettings relief?

Answer 7

Allows someone who lets out their primary private residence to claim CGT relief if they share occupancy with the tenant

Question 8

What costs can be deducted from a gain?

Answer 8

Initial acquisition costs
Costs of improving/enhancing the asset
Disposal costs

Question 9

Can maintenance/repair costs be deducted from a gain?

Answer 9

No

Question 10

What is the calculation for deemed acquisition cost?

Answer 10

[a/(a+b)]*v
where a is the part being disposed of, b is the part being retained, and v is the original cost of the asset

Question 11

In what situations can losses be offset against gains?

Answer 11

If they are made against chargeable assets or EIS/SEIS

Question 12

Can excess losses beyond that of the annual exemption be carried forward to future gains?

Answer 12

Yes

Question 13

Over what time period must losses be registered

Answer 13

Within 4 years of the end of the tax year in which the loss was made

Question 14

What is the qualifying criteria for investor’s relief?

Answer 14

Available to long-term external investors in unlisted trading companies
£10m lifetime limit
Investment must be made on/after 17th March 2016
Investment must be owned for at least three years
Qualifying gains subject to 10% tax rate

Question 15

How do inter-spousal transfers work?

Answer 15

Husband buys asset for £x –> husband transfers asset to wife at value £y –> wife sells asset for £z –> chargeable gain treated as £(z-x)

Question 16

Who must claim holdover relief, and in what time limit?

Answer 16

Both the donor and the receiver must claim within four years

Question 17

Where holdover relief is used, what portion of the gain is used for CGT purposes?

Answer 17

The whole gain based on the original purchase price the donor paid

Question 18

What criteria must an individual meet to qualify for holdover relief?

Answer 18

Sole-trader/partner; or have ≥ 5% voting rights in a company; or use the assets in their business

Question 19

Describe the process used for business rollover relief

Answer 19

Business asset sold –> new business asset bought within 3 years of sale –> new business asset sold –> disposal for CGT purposes using overall gain on combination of business assets

Question 20

Describe the process used for deferral relief

Answer 20

Chargeable asset disposed of –> gain invested into an EIS 12months before or within 3 years of disposal –> EIS shares disposed of –> disposal for CGT purposes (not exempt)

Question 21

How long does an investor have to claim deferral relief?

Answer 21

5 years after the first 31st January