Capital Gains Tax

Question 1

How do you calculate A capital gain

Answer 1

Disposal proceeds - acquisition cost = capital gain

Question 2

What events are considered a disposal

Answer 2

Transfer of ownership or deviation of capital sum from asset

Question 3

What is ascertainable deferred consideration

Answer 3

What payment for an asset is deferred and the amount received on disposal is fixed

Question 4

What is Unascertainable deferred consideration

Answer 4

When payment for an asset is deferred and the amount to be received is not fixed

Question 5

What is contingent consideration

Answer 5

When payment for an asset is only payable if certain conditions are satisfied

Question 6

How does it work if an asset is liable to income and capital gains tax

Answer 6

Any income tax charge is deducted from disposal proceeds for calculating the gain

Question 7

How do iht and cgt interact

Answer 7

A cgt valuation is different to a an IHt value

If a disposal has been charged to IHt then CGt holdover relief can be claimed

Question 8

What are the main indicators of a trading transaction

Answer 8

Period of ownership
Quantity purchased 
Motive
Financing of transaction
Frequency of transaction

Question 9

Can you carry forward an annual exemption

Answer 9

No

Question 10

What are the. Main assets exempt from Cgt

Answer 10

Principal private residence
Private motor vehicles
National savings certificates and premium bonds
Government and corporate bonds
Chattels if the value doesn’t exceed £6k ( the gain can not exceed 5/3rds of excess above £6k

Question 11

What is the letting relief

Answer 11

If you have let out your principal main residence and have claimed private residence relief but still have a chargeable gain you can claim letting relief.

The amount is the lower of
£40,000
The same amount as you got for private residence relief
The same amount as the chargeable gain you made from letting your home

Question 12

When can’t you use private residence relief for a principal residence

Answer 12

If you purchased the property wholly to make a gain

Question 13

How do you calculate the gain

Answer 13

Disposal proceeds (sale or market value)
Minus
Acquisition cost
Minus
Purchase and sale costs and any enhancement costs
Set off allowable capital losses/ set off against gains in same year/carry forward unused losses
Minus
Annual exempt amount in best way to minimize tax
Calculate tax at appropriate rates

Question 14

What is the formula for part disposals

Answer 14

A = proceeds of part disposal
B= market value of part retained 

A
———— x original cost
A + B

Question 15

What are the main reliefs for CGT

Answer 15

Entrepreneurs
Investors
Holdover
Business rollover
Rollover relief on incorporation
Reinvestment into EIS shares
Reinvestment into SEIS

Question 16

What are the requirements for entrepreneurs relief

Answer 16

Can be claimed in disposal of a business on disposals of assets used in the business
Can be claimed for disposals on shares in a business if 5% shareholding and individual is employee or director - must be entitled to 5% of firms distributable profits or assets in wind up or 5% of proceeds on disposal of firms ordinary shares
Available on first £10m qualifying gains
Assets must have been owned for 2 years

Question 17

What is the criteria for investors relief

Answer 17

Investment into unlisted trading companies
£10m limit seperate to entrepreneurs relief 10% rate
Shares must be newly listed
Issued after 16/03/16
Held for 3 years since 16/03/16

Question 18

What is holdover relief

Answer 18

When the gain is held over by way of a gift

Not available if settlor has an interest in the trust

Question 19

What are the main categories entitled to holdover reliefs

Answer 19

Transfers chargeable to IHt

Disposals or trading assets

Question 20

When can business rollover relief be claimed

Answer 20

If a business sells assets used in the business to buy other assets for the business

Relief defers the gain until disposal of new assets

Question 21

What are the identification rules for shares

Answer 21

1. Shares acquired on the same day
2. Shares acquired within following 30 days
   Shares acquired within the share pool

Question 22

How are bonus scrip issue shares treated for identification rules

Answer 22

As if the are acquired on the same day

Question 23

How are rights issues treated for identification rules

Answer 23

Added to the share pool

Question 24

How are scrip dividends treated for identification rules

Answer 24

Treated as if new acquisitions