Capital Gains Tax

Question 1

What type of profits are subject to CGT, in that they come from the sale of an asset?

Answer 1

Capital profits

Question 2

Individual resident in the UK: basic rule is they’re chargeable to CGT on the disposal of any chargeable assets they own, regardless of […]

Answer 2

where in the world the asset was situated

Question 3

Do Individuals who aren’t resident in the UK pay CGT even if the asset they sell is situated in the UK?

Answer 3

No

Question 4

Non-UK residents are chargeable to CGT if they dispose of interests in what type of asset?

Answer 4

UK land

Question 5

What are wasting chattels?

Answer 5

Moveable property with a lifespan of < 50 years (e.g. cars, boats, watches, and farm animals)

Question 6

Are wasting chattels generally subject to CGT?

Answer 6

No

Question 7

Are gains on machinery used in business subject to CGT?

Answer 7

Yes

Question 8

What are non-wasting chattels?

Answer 8

Moveable property with a lifespan of more than 50 years (e.g. jewellery, fine art, antiques)

Question 9

When is a non-wasting chattel exempt from CGT?

Answer 9

When it’s disposed for less than £6,000

Question 10

Name three situations where gains are not taxable (aka Exempted disposals)

Answer 10

1. Transfer of property upon the death of a property owner
2. Transfer between spouses
3. Transfer to a charity

Question 11

When is CGT generally due and payable in full?

Answer 11

31 January following the year in which the gain was made

Question 12

When must CGT on UK residential property be paid?

Answer 12

Within 60 days of completion

Question 13

What is the basic calculation of a gain for CGT purpsoes?

Answer 13

Proceeds of sale - costs of acquisition = capital gain

Question 14

If an asset was given as a gift or sold to someone closely related to the seller, what value do we use instead of the proceeds of sale in the capital gain calculation?

Answer 14

Current market value of the asset

Question 15

What costs are deductible from the proceeds of sale?

Answer 15

Costs incidental to the disposal (e.g. legal, estate agent fees, advertising costs)

Question 16

Costs of acquisition: these will add in associated costs such as _____ _____ incurred to make the purchase, and any _____ _____ _____ tax paid

Answer 16

legal fees, stamp duty land

Question 17

Are revenue expenses which maintain and repair an asset deductible from the costs of the acquisition?

Answer 17

No

Question 18

Are the costs of enhancement deductible from the costs of acquisition for CGT purposes? If so, when?

Answer 18

Yes - provided the enhancement was still part of the asset when it was sold/disposed

Question 19

Can the costs incurred by an owner in keeping/defending title such as in a land dispute be deducted in the costs of acquisition?

Answer 19

Yes

Question 20

What is the current annual exemption amount for individuals?

Answer 20

£6,000

Question 21

What type of persons are given annual exemptions from CGT?

Answer 21

Individuals

Question 22

Do companies receive annual exemptions from CGT?

Answer 22

Never!

Question 23

What is Private Residence Relief (PRR)?

Answer 23

A CGT tax relief which exempts all/part of a gain which arises on a property which an individual has used as their primary place of residence

Question 24

When is 100% of the gain exempt from CGT due to PRR?

Answer 24

When the home was always occupied during ownership

Question 25

What formula is used to calculate the exempt amount when an owner did not occupy their home 100% of the time for PRR?

Answer 25

Gain x (Period of occupation ÷ Period of ownership)

Question 26

What are the 4 scenarios where a homeowner will have deemed occupation for the purpose of PRR (and what are their time limits)?

Answer 26

1. Any reason - 3 years
2. Owner is abroad due to their employment - Unlimited
3. Owner was working elsewhere - 4 years
4. Last 9 months of ownership

Question 27

Can the periods of deemed occupation apply cumulatively?

Answer 27

Yes

Question 28

What are the three situations in which Business Asset Disposal relief (BADR) will apply?

Answer 28

Disposals of:
1. All/part a trading business that the individuals owns for at least 2 years before disposal
2. Shares in a trading company if individual owns 5% of voting rights and was an officer/employee 2 years before disposal
3. Assets owned and used in business 2 years before disposal

Question 29

What is the tax rates on assets on which BADR applies and what is the lifetime limit?

Answer 29

10% and £1,000,000

Question 30

What is holdover relief?

Answer 30

A relief against CGT which allows an individual to gift assets, postponing any gain so that it is ‘held-over’ until the recipient of the gift disposes of them

Question 31

How is holdover relief calculated?

Answer 31

Donor’s gain (Market value - acquisition cost)

minus

Donee’s acquisition cost (market value)

Question 32

What are four qualifying assets under holdover relief?

Answer 32

1. Used for the purposes of a trade/profession in a company which the individual own at least 5% of shares
2. Shares in an unlisted trading company
3. Shares in transferor’s personal company
4. Agricultural land

Question 33

What is incorporation relief?

Answer 33

A relief of CGT if a person transfers their business to a company in return for shares, meaning they won’t pay any tax until they dispose of the shares

Question 34

An individual can defer payment on CGT by investing in shares in what kind of scheme?

The investment must be made within what 2 timeframes?

Answer 34

Enterprise Investment Scheme (EIS)

1 year before the gain was made

3 years after the gain was made

Question 35

A company that has shares through the EIS should generally meet what 3 conditions?

Answer 35

1. The company is not listed
2. The company has less than 250 full time employees
3. The company’s gross assets do not exceed £15,000,000

Question 36

What is replacement of business assets relief (aka rollover relief)?

Answer 36

A relief that allows CGT on a capital gain to be deferred when the proceeds from the disposal of an asset are reinvested in a new asset

Question 37

Give 2 types of assets that Rollover relief apply to

Answer 37

1. Land and buildings used for a trade
2. Fixed plant and machinery

Question 38

For rollover relief to apply, the reinvestment must take place within which 2 timeframes?

Answer 38

1. 1 year before; or
2. 3 years after

the asset is sold

Question 39

For rollover relief, full relief is only available if all the proceeds were _________. Otherwise, any proceeds retained will become __________

Answer 39

reinvested, chargeable

Question 40

What are the CGT rates for Higher/additional payers and for everyone else?

Answer 40

Higher/additional - 20%
Everyone else - 10%

Question 41

What are the CGT rates for Higher/additional payers and for everyone else for residential property?

Answer 41

Higher/additional - 28%
Everyone else - 18%

Question 42

If a taxpayer incurred ______ on disposition of a capital asset, these must be used to offset ______ in the _____ _____ before applying the Annual Exempt Amount

Answer 42

gains, losses, same year