Capital Gains Tax Flashcards
What is Capital Gains Tax?
The profit on when you dispose of an asset that has increased in value
What are the elements needed for CGT to arise?
- Chargeable disposal
- Chargeable asset
- Chargeable person
- Chargeable gain
What constitutes a chargeable disposal?
- The sale of an asset
- The lifetime gift of an asset
Is a gift on death (by will or intestacy) a chargeable disposal?
No
What is a chargeable asset?
- Certain valuable possessions (not cars)
- Certain non-physical assets (shares)
- Real property (unless main home)
Who is a chargeable person and who is not?
- UK taxpayer
- Companies do not pay CGT
- Charities are exempt
What is a chargeable gain?
Looks at the increase in value of the asset
What must be taken into account when calculating chargeable gain?
Allowable expenditure
What falls into allowable expenditure for CGT?
- Costs in acquisition
- Costs that contribute to value of asset
- Costs in disposing of asset
Does maintenance or repair count towards allowable expenditure?
No
What is annual CGT exemption?
£3,000
What if someone has made losses on assets during the tax year?
They can offset that against gains made
What is Private Residence Relief?
You do not pay CGT if you sell or dispose your home
What conditions are required for Private Residence Relief?
- Main home for all the time they lived in it
- They have not let it out (other than lodger)
- Not been used for business purposes (unless temporary office)
- Grounds including all buildings are less than 5,000 square metres
- Not bought just to make a gain
Can married couples treat two properties as their main home?
No, they can’t have one each.
