Capital gains tax (Individuals)

Question 1

How does a capital gain arise?

Answer 1

May arise on the disposal of a capital asset .

Chargeable gain on the disposal of an asset that has increased in price.

Question 2

What are the steps when deciding whether there has been a chargeable gain or allowable loss?

Answer 2

CHARGEABLE PERSON has made a CHARGEABLE DISPOSAL of a CHARGEABLE ASSET

Question 3

Who are included as chargeable persons?

Answer 3

Individuals

Partners

Trustees

Companies who pay corporation tax on their chargeable gains (not CGT)

Question 4

What are included as chargeable disposals?

Answer 4

Sale of the whole or part of an asset

Gift of the whole or part of an asset

Pretend they were sold at market value

Question 5

What defines a chargeable asset?

Answer 5

All capital assets except those which are specifically exempt from CGT

E.g. land, furniture, art, shares and leases

Question 6

What assets are exempt?

Answer 6

Cash

Classic cars

Most wasting chattels

Non wasting chattels <£6k

National savings certificates and premium bonds

ISA

Question 7

What is the annual exempt amount for CGT?

Answer 7

£6000

Question 8

How is CGT computed?

Answer 8

Capital gains falling within the basic rate tax band are taxed at 10%

Capital gains falling within the higher or additional rate band are taxed at 20%

IN THE TABLES

Question 9

What are chattels?

Answer 9

Item or tangible moveable property

Question 10

What makes a chattel wasting?

Answer 10

If it has a predictable lifespan of less than 50 years

E.g. Plant and Machinery

Usually exempt from CGT

Question 11

What makes a chattel non-wasting?

Answer 11

Has a predictable lifespan of more than 50 years

E.g. antiques, jewellery and art

Generally chargeable to CGT

Question 12

What are the 6K rules?

Answer 12

Purchase price <£6k, Sale proceeds <£6k, EXEMPT

Purchase price <£6k, Sale proceeds >£6k , 5/3 (Gross sale proceeds -£6k)

Purchase price >£6k, Sale proceeds <£6k, Restrict loss (deemed Gross proceeds of £6K)

Purchase price >£6k, Sale proceeds >£6k, Normal CGT

Question 13

What chargeable disposals are exempt?

Answer 13

Gifts to charities, art galleries, museums etc

Death

Question 14

What are the steps for calculating CGT liability?

Answer 14

1. Determine the chargeable assets
2. Compute the gains/losses on those assets to fund the total gains for the tax year
3. Deduct £12,300 from total gains to get taxable gains
4. Determine correct tax by checking individual’s taxable income and check for any remaining basic rate band

Question 15

What is the formula to work out the disposal of an asset from a set?

Answer 15

Cost x A/A+B

A = value of part disposed

B = current market value of part retained

Question 16

In a partnership, who is liable to pay CGT?

Answer 16

Partners individually liable

Question 17

Are goodwill and shares chattels?

Answer 17

No

Question 18

Is a caravan a wasting chattel?

Answer 18

Yes

Question 19

How are partners dealt with when it comes to cgt?

Answer 19

Partners taxed individually

Question 20

In a drawn out saga, when are goods treated as disposed?

Answer 20

When contracts have been exchanged