Capital Gains Tax Flashcards
What is capital gains tax?
Tax on profit when you dispose of an asset that has increased in value
When are the elements of CGT arising?
- Chargeable disposal
- Chargeable asset
- Chargeable person
- Chargeable gain
What is a chargeable disposal?
- Sale of an asset
- Lifetime gift of an asset
Do cars count as chargeable asset?
No
Do shares count as chargeable asset?
Yes
Does real property / land count as chargeable asset?
Yes
What is a chargeable person?
Individual UK taxpayer
Do companies pay CGT?
No
Do charities pay CGT?
Usually exempt
What is a chargeable gain?
Increase in value of the asset less allowable expenditure
What constitutes allowable expenditure?
- Costs in acquiring asset
- Costs contributing to value
- Costs in disposing asset
What is offset of losses?
If taxpayer made losses on assets during tax year, may offset against gains made
What is the annual CGT exemption?
£3,000
What is private residence relief?
Person does not pay CGT if they sell or dispose their home
What are the conditions required for private residence relief?
- It has been person’s main home for all the time they lived in it
- They have not let it out (other than lodger)
- It has not been used for business purposes (using as temp office is ok)
- Grounds including all buildings are less than 5,000 sqM
- Was not bought just to make a gain
What is the rule on married couples on private residence relief?
Married couples and civil partners can only treat one property as their main home between them (can’t have one each)
Does the rate of income tax make a difference to the CGT payable?
Yes
Does a gift to a spouse mean CGT is payable?
No
