Capital Gains Tax Flashcards
Capital Gains Tax: Scope
Charged on:
Gains arising from
Chargeable disposals
Of
Chargeable assets
By
Chargeable persons
CGT: Chargeable persons
Individuals and companies
But companies pay CT on gains not CGT
(So individuals?)
CGT: Chargeable disposals include:
- Sale
Or gift
Of
Whole
Or part
Of an asset - Loss
Or total destruction
Of an asset
CGT: Chargeable disposals don’t include:
- Gifts to charities
- Disposals on death
- Disposals between spouse/civil partners
CGT: For disposals under contract: Date of disposal is: Contract not conditional
When the contract is made
CGT: For disposals under contract: Date of disposal is: Contract is conditional
Date when all conditions are met
CGT: Which assets are chargeable?
All
Unless specifically exempt
CGT: Exempt assets include:
Cash
Motor cars (Incl vintage)
Gilt edges securities
Qualifying corporate bonds
National savings certificates
Premium bonds
Prizes and bettings winnings
Assets in ISAs
Certain types of chattels
CGT: Annual exempt amount
£12,300
CGT: Can annual exempt amount be brought/carried forward
No
CGT rate depends on
Individual’s TAXABLE INCOME
CGT rate: Higher/Additional rate taxpayers
20%
CGT rate: Basic rate taxpayers
10% on gains
Falling within the unused basic rate band
20% on the excess
How you can calculate any unused basic rate band?
The difference between:
Taxable income
And basic rate band limit
CGT assessment method
Self assessment
CGT: Deadline
31 Jan
Following end of the tax year
(Self-Assessment return date)
CGT: Disposal of a single asset proforma
Disposal consideration
Less: incidental costs of disposal
Less: Allowable costs
Cost of acquisition
Incidental costs of a acquisition
Enhancement expenditure
CGT: Chargeable gain
Gain before annual exempt amount
CGT: Taxable gain = after…
Annual exempt amount deducted
CGT: Disposal consideration: Usually
Usually: Proceeds received from asset
CGT: Disposal consideration: Exception
Disposal not made at arms length
E.g. gift
CGT: Disposal consideration: Not at arms length
Market rate
Incidental costs of disposal examples
Auctioneers fees
Estate agent fees
Legal costs
CGT: Allowable expenditure
(That may be deducted from net proceeds)
- Acquisition cost of the asset
- Expenditure on enhancing the value of the asset (capital expenditure)
E.g. new extensions, architect’s fees - Incidental costs of acquisition
E.g. legal fees, surveyors fees, stamp duty
CGT: Acquisition cost: Usually
Purchase cost of asset
CGT: Acquisition cost: Inherited
Probate value
(Market value at death)
CGT: Acquisition cost: Received gift
Market value at date of gift
Chattel definition
Tangible moveable property
E.g. picture, table
The 2 types of chattels
- Wasting chattels
- Non-wasting chattels
Wasting chattels: Expected life
Not exceeding 50y
E.g. caravan, boat, animals, moveable plant and machinery claimable for CGT
Wasting chattels: Tax treatment
Exempt from CGT
Non-wasting chattels: Expected life
More than 50y
E.g. antiques, jewellery, paintings
Non-wasting chattels: Tax treatment:
Gross proceeds less than or equal to 6k
Cost less than or equal to 6k
Exempt
Non-wasting chattels: Tax treatment:
Gross proceeds more than 6k
Cost more than 6k
Taxable as normal
Non-wasting chattels: Tax treatment:
Gross proceeds less than or equal to 6k
Cost more than 6k
Marginal loss is restricted:
Gross proceeds deemed to be 6k
Non-wasting chattels: Tax treatment:
Gross proceeds more than 6k
Cost less than or equal to 6k
Marginal gain restricted to:
Lower of:
- Normal gain
- 5/3 x (Gross proceeds - 6k)
CGT (Non-wasting chattels): Gross proceeds
Sales proceeds
Before deducting and incidental costs of disposal
CGT (Non-wasting chattels): Cost
Original acquisition cost
Sets of non-wasting chattels
Group of similar or complimentary items
That are worth more together than separately
E.g. pair of vases by the same ceramist
Acquisition cost of one of a set of chattels
And for disposal in parts of large assets broken up (e.g. part of price of land)
Cost x A/(A+B)
A = Market value of part disposed of
B = Market value of part retained
Disposal of sets of chattels to the same or connected parties: Treatment
Disposals will be treated as one when applying
The 6k rule
The restriction for marginal gains (5/3 rule)
Disposal of sets of chattels to the same or connected parties: Treatment: Disposals made in different tax years
Gain calculated on:
Total figures
Then apportioned to each disposal
Based on sale proceeds
