CAPITAL GAINS TAX

Question 1

DEPRECIATING ASSETS S154 - FIXED ONLY.

Answer 1

Useful life of less than 60 years

E.g 57 year lease becomes a wasting asset within 10 years.

Defer the gains for the earlier of:
Disposal of asset
Ceasing to use in trade
10 years from acquisition

Gain is frozen and not deducted from base cost. If non-depreciating is purchased, roll over.

Question 2

INCORPORATION RELIEF S162

Answer 2

Fully deferred if:

Going concern
All assets (except cash)
Consideration is in the form of shares.

Gains deducted from the market value of shares.

Disposal of shares - ER if held for 12 months and 5% and shareholding disposed of.

Question 3

INCORPORATION RELIEF - NON SHARE CONSIDERATION

Answer 3

Transfer assets and leave proceeds on the loan account - tax free drawdown.

Utilitise the Annual exemption.

Retained assets such as land and buildings - no ER if commercial rent charged. Full ER if no rent charged and disposed at the same time as 5% shareholding disposed of.

Question 4

DISAPPLY INCORPORATION RELIEF

Answer 4

Base cost of the shares - their market value.

Accelerated tax on the gains.

Goodwill - 20% after annual exempt amount.
Land and buildings - 10%.

Usually only disapplied if ER is unlikely to be available later on (stops working for co)

Question 5

ENTREPRENEURS RELIEF FOR SHARES

Answer 5

If for 12 months preceding disposal:

Personal company (5%)
Trading company
Officer/Ee at disposal
Cumulative gains up to a max £10m

Taxed at reduced rate of 10% instead of 20%.

Question 6

ASSOCIATED DISPOSAL

Answer 6

Taxed at 10% if:

Sale is in conjunction with a material disposal.
Part of withdrawal (5%)
No arrangements in place for repurchasing shares.
Asset used for trade purposes up to one year before disposal.

Sale within 3 years - May qualify.

Time apportion for any period where the shares weren’t owned.