Capital Gains Tax

Question 1

What does there need to be for a CGT gain to be due?

Answer 1

A chargeable disposal of a chargeable asset by a chargeable person

Question 2

What constitutes a disposal?

Answer 2

Sales
Gifts (gift absolute, trust, settlement)
Exchanges of property

Question 3

When a sale is made, what sets the date of the disposal

Answer 3

The date the contract becomes binding

Question 4

How are transfers between spouses or partners treated?

Answer 4

On a no gain/loss basis

Receiving spouse takes on the original acquisition cost.

Only for spouses living together during that tax year.

Question 5

How long do spouses that are no longer living together have to make no gain, no loss transfers?

Answer 5

3 tax years

Question 6

What can a spouse that retains an interest in a family home being sold after divorce claim?

Answer 6

Private Resident Relief (PRR)

Question 7

What happens to CGT disposals on death?

Answer 7

Gains are washed out.
No tax is due
Beneficiary acquires the asset with a base cost of the value at death.

Question 8

For CGT, what is the usual value of the disposal?

Answer 8

The price paid between the two parties.

Unless the transaction is between connected parties, then it is by the market value at the time.

Question 9

What is the name of a transaction that happens between connected parties?

Answer 9

Not at arms length transactions.

Question 10

How is tax levied against known about future payments for CGT?

Answer 10

They should be included in the tax return for the year.

Question 11

How is tax levied against not known about future payments for CGT?

Answer 11

Consider whether the right to income could be sold on the open market.

If yes, include this value in the current tax return.

If not, it should be included in the year it is received.

Question 12

Name some CGT exempt assets
10

Answer 12

Motor vehicles if not dealing
NS&I certs and premium bonds
Goverment and corporate bonds
Foreign currency for personal use
Gambling wins
ISAs
Compensation
Decorations for valour
Chattels (to a certain amount)
Personal private residence

Question 13

How are chattels taxed

Answer 13

Either the actual gain
Or 5/3 x the amount above £6000

Whichever is lower

Question 14

What are the conditions a private residence must meet to be exempt CGT?

Answer 14

One house (can be elected, but if not, it is done by evidence)
Must actually be lived in.
Only one house per married couple that live together.

Question 15

How long can an election for a personal residence be back dated?

Answer 15

No more than 2 years

Question 16

What are the recognised exemptions to reducing gains when unable to live in your personal residence?

Answer 16

One year between purchase and moving in.
Last 9 months of ownership (must have been main residence at some point)
Last 36 months for those with qualifying disabilities and long-term care.
Last 18 months if sold between 6 April 2014-2020
Any period before 1 April 1982
Living in job related accommodation and intending to return to the property.
Working abroad
4 years working elsewhere in the UK
Periods of 3 years
(house lived in before, after, and no other was exempt during for these)

Question 17

How is CGT worked out for part let houses?

Answer 17

The part let will be exempt to the lower of £40,000 or the exemption on the occupied by the owner.

Question 18

How do you calculate CGT?

Answer 18

Determine disposal
Deduct acquisition cost
Deduct arrangement/enhancement costs
Offset loses
Deduct annual exemption
Apply tax rates

Question 19

What is the date is used to value old purchases.

Answer 19

Their value on 31/03/1982

Question 20

What are the rates for CGT?

Answer 20

10% basic
20% higher

Question 21

What is the surcharge charge for residential property CGT?

Answer 21

8%

Question 22

How are loses in the same year used for CGT?

Answer 22

Offset in full against gains in the current year.

Question 23

How are unused losses used for CGT?

Answer 23

They can be carried forward indefinitely as long as they are claimed within 4 years of the end of the tax year they fall.

Only use the amount required.

Question 24

How is the sur change for property gains applied.

Answer 24

8% added to each tax bracket.

So if straddling rates would be 18% and 28%

Question 25

How many years must a business be held to be eligible for business asset relief?

Answer 25

2 years
Maximum 20% business assets form non-trading assets.
Including cash.

Question 26

What does business asset relief do?

Answer 26

Brings down tax from 20% to 10% on lifetime gains up to £1,000,000 for business sold.

Question 27

Can BADR be used for a disposal of shares?

Answer 27

Yes. As long as they hold at least 5% of the business shares. (Either director or employee)

Question 28

What can BADR also be applied to?

Answer 28

Long-term holdings of unlisted companies. (EIS, SEIS)

Question 29

What was BADR previously known as?

Answer 29

Entrepreneurs relief

Question 30

What qualifies for holdover relief?

Answer 30

Gift disposals, including trading assets and private shares

Question 31

How can holdover relief be claimed?

Answer 31

The donor and donee must both claim at the same time.

Question 32

What does holdover relief do?

Answer 32

Passes the tax to the donee who pays later.

Question 33

What is business rollover relief?

Answer 33

Allows for gains on sale of assets used in business to roll tax onto a replacement asset and pay when that is disposed.

Question 34

When can an asset be reinvested into an EIS?

Answer 34

12 months prior to and 36 months after the disposal.

Question 35

What is the limit for reinvestment into SEIS?

Answer 35

£100,000 per tax year.

Question 36

How are sales of sold shares compared to their purchase price?

Answer 36

Any purchase of shares on the same day
Any purchase of the same share within 30 days
The average price of the remaining shares
Shares purchased more than 30 days after the sale.

Question 37

When should CGT be paid?

Answer 37

31/01

Question 38

What is the period residency is tested on?

Answer 38

April 6th to April 5th