Capital gains tax

Question 1

Disposal’s between spouses for CGT

Answer 1

• No gain, no loss
• Inter-spouse transfers are only treated this way if the spouses are living together at some
  point during the tax year.

Question 2

CGT on death

Answer 2

• No CGT on death
• Beneficiaries of the estate are deemed to acquire the asset at its market value on date of death

Question 3

Chattels

Answer 3

• Tangible, movable property
• Exempt from CGT if value at disposal is less than £6,000
• If value exceeds £6,000, the chargeable gain cannot exceed 5/3 of the excess over £6,000

Question 4

Deductible costs for CGT

Answer 4

• Stockbroker fees
• Legal costs
• Estate agent fees
• Stamp duty
• Enhancement expenditure

Question 5

Capital Losses

Answer 5

• Must be set against gains from the same tax year first
• Even if this reduces gains to below the annual exempt amount
• Loss can then be carried forward

Question 6

Capital Losses

Answer 6

• Must be set against gains from the same tax year first
• Even if this reduces gains to below the annual exempt amount
• Loss can then be carried forward (after deducting annual exempt amount) and set against gains in subsequent years
• Must be claimed within 4 years of the end of the tax year they were made
• Can then be carried forward indefinitely
• Can be carried backwards for 3 tax years if taxpayer dies

Question 7

Part disposal

Answer 7

• Disposal proceeds / ((Disposal proceeds + Value of part retained) x original cost)

Question 8

BADR criteria

Answer 8

• Assets must have been owned for 2 years
• No more than 20% of business assets can be ‘non-trading’
• No more than 20% of income can come from ‘non-trading’ activities
• Must have at least 5% shareholding

Question 9

Holdover relief

Answer 9

• Can holdover the gain on disposals of assets by way of gift
• No CGT is payable at time of gift, but recipient acquires the asset at the donors acquisition cost
• Donor and recipient must jointly claim it (or just donor if into trust)
• Not available on transfer of shares

Question 10

Bed and breakfasting

Answer 10

• Repurchase of shares must be at least 30 days following disposal to be effective

Question 11

Payment of CGT

Answer 11

• Reported to HMRC through self-assessment
• If individual doesn’t receive a tax return, must inform HMRC of gain within 6 months of the end of the tax year of disposal
• Tax payable on 31st January following the tax year the gain was made
• Unless it is a residential property gain, then a payment on account must be made within 60 days of completion
• Done by making an online property report with final calculation made through self-assessment and balance paid 31 January