Capital Gains Tax (CGT) Flashcards
Which of the following is NOT a condition for a Capital Gains Tax (CGT) liability to arise?
A. Chargeable gain
B. Chargeable disposal
C. Chargeable asset
D. Chargeable location
D. Chargeable location
Explanation: CGT arises only when there is a chargeable disposal, asset, person, and gain. There is no such concept as a chargeable location.
Which of the following would qualify as a chargeable disposal for CGT purposes?
A. Gift of a property during lifetime
B. Inheritance of a property on death
C. Use of a property as a main residence
D. Selling a car
A. Gift of a property during lifetime
Explanation: Gifts made during lifetime count as chargeable disposals. Inheritance on death is not chargeable, and cars are exempt.
Which of the following expenses can be used to reduce the CGT chargeable gain?
A. Mortgage interest
B. Capital improvements like an extension
C. General wear and tear repairs
D. Insurance premiums
B. Capital improvements like an extension
Explanation: Only expenditure that enhances the asset’s value is deductible. Routine repairs and financing costs are not.
What is the effect of the CGT annual exemption?
A. It allows a tax-free gain on any one asset
B. It exempts main homes from CGT automatically
C. It deducts a fixed amount of gain from total gains before tax
D. It exempts the disposal of inherited assets
C. It deducts a fixed amount of gain from total gains before tax
Explanation: Each individual gets an annual tax-free allowance for capital gains, currently £3,000.
Alex, a UK resident, sells a commercial unit for £300,000. He originally bought it for £200,000, and spent £10,000 on improvement work. What is his chargeable gain?
A. £100,000
B. £90,000
C. £110,000
D. £120,000
B. £90,000
Explanation: Gain = £300,000 − £200,000 − £10,000 = £90,000. Improvements reduce the gain.
Lauren buys a second property for £500,000. Ignoring other reliefs, how is SDLT affected by the fact it is her second property?
A. She must pay an extra 3% on the full amount
B. She is exempt because she owns a property already
C. She only pays SDLT on the amount over £425,000
D. There is no SDLT as it’s under £625,000
A. She must pay an extra 3% on the full amount
Explanation: A 3% surcharge applies on the total price of a second property, on top of standard rates.
Priya bought a house for £200,000, made £20,000 of capital improvements, and sells it for £260,000. What is the chargeable gain?
A. £40,000
B. £20,000
C. £60,000
D. £30,000
A. £40,000
Explanation: £260,000 − £200,000 − £20,000 = £40,000 chargeable gain.
Sasha gives her holiday home to her brother. She originally paid £150,000 for it, and it’s worth £250,000 now. Which of the following is TRUE?
A. Sasha has made a chargeable disposal with a gain of £100,000
B. This is not a disposal for CGT as it’s a gift
C. Sasha can defer CGT until her brother sells it
D. This is not chargeable if she claims Private Residence Relief
A. Sasha has made a chargeable disposal with a gain of £100,000
Explanation: Gifts made during lifetime are treated as market value disposals, and CGT applies on the gain.
George sold a flat and realised a gain of £20,000. He also incurred a £2,000 loss from selling shares, and has the annual CGT exemption of £3,000. What is his taxable gain?
A. £15,000
B. £17,000
C. £18,000
D. £20,000
c. £18,000
Explanation: £20,000 − £2,000 loss = £18,000
Jaden and his wife each own one property. They are married and living together. Which property qualifies for Private Residence Relief?
A. Only one of their homes
B. Both homes
C. Neither home
D. It depends on who paid more for the properties
A. Only one of their homes
Explanation: A married couple or civil partners can only designate one property as their main residence for PRR.
Rani sells her house which she lived in for 6 years, but let out for the final 2 years. Which statement is TRUE?
A. She may get partial Private Residence Relief
B. She will get full PRR because she once lived there
C. She pays CGT on the entire gain
D. PRR applies only if she still lives there now
A. She may get partial Private Residence Relief
Explanation: Letting out a former main residence reduces the PRR available, but some relief still applies.
Marcus is a UK-resident individual who sells a property and makes a £40,000 chargeable gain. He also gifts a painting worth £15,000 that he bought for £5,000. What is his total gain before exemptions?
A. £50,000
B. £55,000
C. £45,000
D. £60,000
A. £50,000
Explanation: Property gain = £40,000; gift gain = £10,000. Total gain = £50,000.
Which of the following would NOT normally be treated as a chargeable disposal for CGT purposes?
A. A lifetime gift of a second home
B. A sale of a valuable painting
C. A gift made in a will
D. A sale of shares in a private company
C. A gift made in a will
Explanation: Transfers on death are not treated as chargeable disposals for CGT. They are dealt with under inheritance tax.
Mateo sold a property he never lived in for £800,000, having bought it for £500,000. He also made a capital loss of £15,000 on shares in the same tax year. What gain is subject to CGT if his annual exemption is £3,000?
A. £297,000
B. £282,000
C. £285,000
D. £300,000
B. £282,000
Explanation: Gain = 800k – 500k = 300k – 15k (loss) – 3k (exemption) = £282,000.
Amira, a UK resident, sells her rental property for £500,000. She bought it for £400,000 and paid £10,000 in legal fees and £5,000 in estate agent costs. What is her chargeable gain?
A. £85,000
B. £100,000
C. £95,000
D. £90,000
D. £90,000
Explanation: Gain = 500,000 – (400,000 + 10,000 + 5,000) = 85,000. CGT is charged on this gain minus any exemptions or losses.
