Capital Gains Tax Individuals Flashcards
What is business asset disposal relief?
First £1m of gains on qualifying assets in lifetime = taxed at 10% (but uses up all BRB
Assets must be owned at least 2 years
Qualifying assets:
All/ substantial part of trading business or individual asset of business within 3 yrs of cessation or
Shares in personal tarding company (> or equal to 5%) & individual employee
Deduct capital losses and AEA from non-qualifying gains first
BADR must be claimed by 31 Jan 2024 for 2021/22
What is investors relief?
Extends benefits of BADR to investors who cant get BADR
For the disposal of:
Unlisted ordinary shares in a trading company
Subscribed to on/after 17 March 2016
Held for minimum period of 3 years starting on 6 April 2016
By an individual who is not an employee of the company
Subject to seperate £10m lifetime limit
What is Roll over relief?
For disposal of and re-investment in:
Qualifying Business asset
Land and buildings
Fixed plant and machinery
Goodwill
Must be used in the trade (if part non-business, only business part eligible for ROR
Within qualifying time period
For 1 year before or 3 years after sae
Claim date:
within 4 years from the later of the end of tax year of sale or replacement
How do you deal with depreciating assets?
Life< or equal to 60 years
Gain not deducted from cost of replacement, but deffered until earliest of
Sale of depr asset
Depr asset ceases to be used
10 years from acquisition of depr asset
What is gift holdover relief (GR)?
Available for:
Qualifying Assets
Assets used in donor’s trade or personal trading company shares (> or equal to 5%)
Unquoted trading company shares (any %)
Quoted trading shares (> or equal to 5%)
Joint election:
By 4 years from end of tax year of gift
Calculate gain: proceeds = MV
Outright gift:
Donee’s gain deffered (GR)
Donors base cost reduced by (GR)
Sale at undervalue:
Donee’s gain = excess of actual consideration > donors cost
Deferred gain (GR) = Balance
Donor’s base cost reduced by GR
What is GR non-business use?
Gain deferred = business use proportion only
If shares in personal trading company (> or equal to 5%)
What is gift relife restricted to for non business use?
Gift relief restricted = total gain * (CBA/CA)
Where CBA= MV of chargeable business asset
CA = MV of chargeable assets of company
Chareagble assets = assets which would give rise to a chargeable gain on disposal
Disposal of single asset Proforma
Disposal proceeds x
Less: Allowable selling costs (x)
Net Disposal Proceeds x
Less: Allowable expenditure x
Cost of acquisition x
Incidental costs of acquisition x
Additional enhancement expenditure x
(x)
Chargeable gain / (allowable loss) x/(x)
CGT Proforma
Net chargeable gain for tax year x
Annual exempt amount (12,300)
Less: capital losses b/f (x)
Taxable gain x
CGT liability at relevant rate x
Less: payment on account re residential
property disposal (x)
CGT X
How to deal with capital losses?
Current year:
Must be offset against current year gains
Offset before b/f losses
Cannot restrict the offset to preserve AEA
B/F losses:
Offset after AEA deducted, so AEA not wasted
What are the non-residential property disposal rates?
10% on gains if falling in the unused BRB
20% Above BRB
paid by 31 January following end of tax year
What are the residential property disposal rates?
18% on gains falling in unused BRB
28% above BRB
Payment on account due within 30 days of completion based on estimated tax
Tax planning for CGT?
Use of losses and AEA:
Offset against residential property gains first
Doesn’t matter which gain use remaining BRB first
Timing:
Delay disposals to get following year AEA
Delay disposal to get unused BRB in following year
Cash flow advantage of paying tax later
Sell assets piecemeal across different tax years to use AEA’s
