Capital Gains Tax Flashcards
How do you calculate A capital gain
Disposal proceeds - acquisition cost = capital gain
What events are considered a disposal
Transfer of ownership or deviation of capital sum from asset
What is ascertainable deferred consideration
What payment for an asset is deferred and the amount received on disposal is fixed
What is Unascertainable deferred consideration
When payment for an asset is deferred and the amount to be received is not fixed
What is contingent consideration
When payment for an asset is only payable if certain conditions are satisfied
How does it work if an asset is liable to income and capital gains tax
Any income tax charge is deducted from disposal proceeds for calculating the gain
How do iht and cgt interact
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
What are the main indicators of a trading transaction
Period of ownership Quantity purchased Motive Financing of transaction Frequency of transaction
Can you carry forward an annual exemption
No
What are the. Main assets exempt from Cgt
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
What is the letting relief
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
When can’t you use private residence relief for a principal residence
If you purchased the property wholly to make a gain
How do you calculate the gain
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
What is the formula for part disposals
A = proceeds of part disposal B= market value of part retained
A
———— x original cost
A + B
What are the main reliefs for CGT
Entrepreneurs Investors Holdover Business rollover Rollover relief on incorporation Reinvestment into EIS shares Reinvestment into SEIS
What are the requirements for entrepreneurs relief
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
What is the criteria for investors relief
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
What is holdover relief
When the gain is held over by way of a gift
Not available if settlor has an interest in the trust
What are the main categories entitled to holdover reliefs
Transfers chargeable to IHt
Disposals or trading assets
When can business rollover relief be claimed
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
What are the identification rules for shares
- Shares acquired on the same day
- Shares acquired within following 30 days
Shares acquired within the share pool
How are bonus scrip issue shares treated for identification rules
As if the are acquired on the same day
How are rights issues treated for identification rules
Added to the share pool
How are scrip dividends treated for identification rules
Treated as if new acquisitions
