Capital Gains Tax Flashcards
What is a deferred consideration?
This can be either ascertainable (where amount received is fixed) or unascertainable (where amount is not fixed).
What is a contingent consideration?
Where price depends on future profits. If a future payment is received, this is considered as a separate disposal based on difference between payment and current market value.
What are chattels?
Tangible, moveable property which are exempt from CGT provided they are worth less than £6000. The chargeable gain cannot exceed five thirds over £6000. Therefore any gain over £6000 should have that sum removed then multiply by 5 and divide by 3. e.g.
A ring cost £1000 and was sold for £7800
((7800-6000)x5÷3) = 3000.
How is CGT calculated on a residence where there has been a period of absence?
Total gain x (period of occupation ÷ total period of ownership). Most exempt periods must be preceded and followed by periods of occupation.
How do you calculate the gain?
Determine the disposal proceeds Deduct the acquisition cost Deduct and costs incurred Set off any allowable losses in the most tax efficient way e.g. against property in higher rate band Deduct annual exempt amount.
What are the qualifying factors for relief in EIS?
Investment must have been made from 12 months prior to 3 years after gain.
Gain is deferred until disposal of the EIS investment (not exempted).
Investment may qualify for 30% income tax relief and the disposal may get between 10 and 28% CGT relief depending on the type of asset disposed.
Subsequent gain on EIS is usually exempt.
What relief is available for SEIS investment?
50% of reinvested gains are exempt.
Restricted to £100,000 per tax year.
What is ‘bed and breakfasting’?
Realising a gain or loss on an investment without changing the size of the investment. Sale and repurchase must be separated by 30 days for tax purposes.
What is the annual exempt amount for trusts?
£6000 which can be spread across numerous trusts. 5 or more will receive £1200 relief.
List the process for calculating CGT.
Disposal Disposal proceeds Lest costs of disposal Less cost of acquisition Less enhancement costs Chargeable gain Add/deduct any gains/losses Deduct annual exempt amount Calculate tax bracket Pay CGT.
