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AF1 > Capital Gains Tax > Flashcards

Capital Gains Tax Flashcards

1
Q

Name four examples of a disposal for CGT purposes

A

-Sale of asset where profit/loss made
-Gifting of an asset
-Compensation payments received for loss/damage
-Destruction of an asset

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2
Q

When is the calculation date for a CGT disposal?

A

Date the disposal becomes subject to a binding contract of sale

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3
Q

When are most CGT bills due?

A

31st Jan following the end of the tax year

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4
Q

When are CGT bills related to residential property due?

A

Within 60 days of completion

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5
Q

What is the difference between ascertainable and unascertainable deferred consideration?

A

Ascertainable - amount to be received is fixed
Unascertainable - amount to be received is variable

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6
Q

If deferred consideration is more than 18 months after disposal, how do HMRC usually let the CGT be paid?

A

In instalments

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7
Q

What does it mean if a disposal is not considered to be ‘at arms length’, and how do HMRC value the asset?

A

There is a close connection between individual disposing and individual acquiring, thus HMRC will use market value for CGT purposes.

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8
Q

How does the value differ for assets bought before 1982?

A

-Market value at 1/4/1982 used as acquisition value
-No costs incurred prior can be taken into account

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9
Q

How does the spousal exemption work?

A

-Transfers between spouses not deemed a disposal
-Original purchase value used as acquisition cost when disposed

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10
Q

What is 5/3rds chattels relief?

A

-Chattel disposals > £6k
-Can use two methods:
-Actual gain
-5/3rds of the excess over £6,000
-No use if acquisition cost > £6k or disposal value > £15k

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11
Q

What are the 7 different periods classed as deemed occupation?

A

-Year delay between property purchase & move-in
-3 years if preceded and followed by residence
-4 years where employment elsewhere in UK, if preceded and followed by residence
-Any period where working abroad, if preceded and followed by residence
-Any period living in job-related accommodation, if intention is to return to main residence
-Last 9 months of ownership, provided property lived in at any point during ownership period
-Any period before 1/4/1982

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12
Q

When must you make an election for which home is treated as the main residence?

A

Within two years of the purchase of the additional property

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13
Q

If someone chooses to let part of their house, how is it treated for CGT?

A

The part that is let is liable to CGT

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14
Q

What is lettings relief?

A

-Allows £40k of gain on let part tax-free
-Available if property qualified for principle private residence relief
-Can utilise twice if property jointly owned
-From April 2020, only applies to landlords in shared occupancy with tenant

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15
Q

When calculating the acquisition cost of share disposals, what is the set order used?

A
  1. Disposal of shares/units purchased on the same day
  2. Disposal of shares/units purchased within the previous 30 days
  3. Disposal of shares/units in the remaining pool
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16
Q

Where employees acquire and dispose of shares on the same day under an approved employee share scheme, which shares are deemed as being disposed of first?

A

Individual can elect which shares are treated as being disposed of first

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17
Q

What is generally the key differentiator to determine whether costs are offset against income or capital gains tax?

A

Costs for keeping asset in good state (i.e. repairs) - IT

Costs for achieving higher sale price (i.e. adding a conservatory) - CGT

18
Q

True or false? Costs incurred before 01/04/1982 can be offset against gains.

A

False

19
Q

In what order must losses be offset against gains?

A
  1. Set against gains arising in the same tax year
  2. Residual loss value can then be used in future tax years
20
Q

How long does an individual have to register a loss?

A

Within 4 years of the end of the tax year in which the loss arose

i.e. loss in July 2019 must be registered by the end of the 23/24 tax year

21
Q

At what point in the income bucket are gains added?

A

After all other income sources have been tallied

22
Q

If an individual has a life policy gain, how does their basic rate band get determined?

A

Add the top-sliced gain to the income

23
Q

What is Business Asset Disposal Relief?

A

-Dispose of all/part of a business/qualifying shares
-CGT reduced to 10%
-£1m lifetime limit

24
Q

How long must an asset have been owned for to qualify for BADR?

A

2 years

25
Q

For BADR purposes, what is classed as a ‘qualifying interest’?

A

-At least 5% shareholding
AND
-Company director

26
Q

If a business closes, how long does an individual have to dispose of business assets to qualify for BADR?

A

3 years

27
Q

When calculating a CGT liability, when must BADR-qualifying assets be accounted for?

A

Before any other gains

28
Q

What is investor’s relief?

A

-Dispose of unlisted trading company shares
-10% CGT rate
-£10m lifetime limit

29
Q

When must shares have been purchased from to qualify for investor’s relief?

A

16/03/2016

30
Q

How long must shares be held to qualify for investor’s relief?

A

3 years continuously

31
Q

What is holdover relief?

A

-Allows gains to be deferred when assets are gifted
-Original acquisition cost by owner A used when calculating owner B’s gain

32
Q

Who must claim holdover relief for a transfer between individuals and for a transfer into a trust?

A

-Individuals: both donor & donee
-Trust: only donor & trust must accept gift

33
Q

For transfers between individuals, what assets are eligible for holdover relief?

A

-Trading assets (assets used in donor’s company
-Shares in unlisted trading companies where donor holds >5% of voting rights

34
Q

How long must the receiving person remain a UK resident for after receiving a gift to retain holdover relief?

A

6 years

35
Q

What is business rollover relief?

A

Allows the company to defer gains on disposal of assets by purchasing new assets

36
Q

Over what time period can a business claim business rollover relief?

A

New assets must be bought in a period beginning 1 year before and ending 3 years after disposal of the old assets

37
Q

What is incorporation relief?

A

-Defers gain upon transition from an unincorporated business to a ltd co.
-Gain calculated by reducing the base cost of the shares by the original gain

38
Q

What is EIS reinvestment relief?

A

-CGT deferred until disposal of EIS shares
-Claimed when proceeds from any disposal reinvested into an EIS

39
Q

Over what time period can an individual claim EIS reinvestment relief?

A

EIS shares must be bought in a period beginning 1 year before and ending 3 years after disposal of the old assets

40
Q

How much exemption do you get from SEIS reinvestment relief?

A

-50% fully exempt
-50% chargeable

41
Q

Why can gift aid/pension contributions help to reduce a CGT liability?

A

-Extends basic rate band
-Means more of the gain taxed at 10%

AF1 (5 decks)

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