Capital Gains Tax Flashcards

1
Q

Step 1: what are the individuals taxable assets for CGT?

A

Consider wasting chattels (life less than 50 years) and long-life assets below £6,000

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2
Q

Step 2: proceeds of sale

A
  • If sold to someone who is closely related use current market value instead of proceeds of sale
  • When determining proceeds subtract cost incidental to the disposition
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3
Q

Step 3: determine cost of acquisition

A
  • when determining costs, add in associated costs such as legal fees, enhancement related costs, and costs incurred by the owner in preserving, establishing or defending title
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4
Q

Step 4: after proceeds and costs determined…

A

… you subtract costs from proceeds

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5
Q

Step 5: do any reliefs apply?

A
  • consider private residence relief
  • business asset disposal relief (if active two years before disposal) - CGT is 10% with a lifetime limit of £1
  • holdover relief
  • incorporation relief
  • Enterprise Investment Scheme
  • annual exemption (£12,300) - for BADR, annual exemption must be deducted first
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6
Q

Step 5: reliefs - BADR

A
  • Applies if transferor was active two years before disposal
  • partner or sole trader disposes all or part of their trading business
  • individual disposes shares in a trading company and the individual owned at least 5% of the voting shares or was an officer or employee of the company
  • Individual disposes assets owned and used by the individual’s personal trading company or trading partnership
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7
Q

Step 5: reliefs - holdover relief

A

Applies when a donor, and donee agreed that the gain will be calculated at a later date with the donor disposes of the assets

Qualifying assets are
- company in which they owned at least 5% of the shares
- Shares in an unlisted trading company
- Shares in the transfers personal company
- assets that qualify for agricultural property relief

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8
Q

Step 5: reliefs - incorporation relief

A

Applies when an individual transfers their business or partnership as a going concerned to a company and gain will be taxed when the transferor disposes of the shares

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9
Q

Step 5: reliefs - Enterprise Investment Scheme

A
  • investing the gain made in a qualified unlisted company and defer tax due up to one year prior to the gain or three years after it is made
  • chargeable when the EIS shares are sold
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10
Q

Step 6: applicable CGT %

Step 7: deadline for payment

A
  • higher or additional rate payer - 20%
  • 10% to the extent that gains do not exceed the individuals unused income tax basic rate band (i.e., the amount of basic rate amount remaining after an individual’s income has been taxed)
  • gains on residential property taxed at 18% or 28% (but can use AEA first to set off gains)

Deadline
- payable by January 30 following the year in which the gain was made
- UK residential property tax payable within 60 days of completion

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