Capital Gains Tax - Lecture 7

Question 1

Capital gains to qualify

Answer 1

Must be chargeable disposal of chargeable asset by chargeable person

Question 2

Chargeable disposal occurs on (3)

Answer 2

• Sale whole/ part asset
• Gift whole/ part asset
• Loss/ destruction asset resulting in insurance proceeds

Question 3

Exempt disposal (2)

Answer 3

• Transfers on death

- Gifts to charities

Question 4

Chargeable assets

Answer 4

All assets chargeable unless they fall within exemption

Question 5

Chargeable person =

Answer 5

Individual, company or partner in partnership

Question 6

Consideration =

Answer 6

Sales proceeds when sold

Question 7

Market value used instead of consideration if

Answer 7

Asset received by way of a gift

Question 8

If inherited, value of asset is

Answer 8

Probate value

Question 9

Capital costs additions and enhancements are

Answer 9

Allowable deductions provided they are incurred wholly and exclusively for purposes enhancing/ improving asset and are reflected in state asset at date disposal

Question 10

Part disposal formula =

Answer 10

Cost x (Consideration / (Consideration + MV remainder))

Question 11

Incidental costs relating wholly to part sold

Answer 11

Deductible in full

Question 12

Chattel

Answer 12

Tangible, moveable object

Question 13

Wasting chattel

Answer 13

• Expected life < 50 years

- Exempt from CGT

Question 14

Wasting asset not exempt from CGT when..

Answer 14

Capital allowances claimed

Question 15

Non wasting chattel

Answer 15

• Expected life > 50 years

- Exempt under £6000, chargeable over

Question 16

If bought > £6000 but sold for < £6000

Answer 16

Allowable loss, but proceeds deemed = £6000

Question 17

If cost < £6000 but sell for more

Answer 17

Tax lower of gain OR

5/3 x (gross proceeds - £6000)

Question 18

If bought and sold for more than £6000

Answer 18

Chargeable in full

Question 19

Losses deducted from gains in..

Answer 19

Same period as much as possible

Question 20

If losses > gains for tax year

Answer 20

Unrelieved loss carried forward to next year (but not allocated against gains where this would waste annual exemption)

Question 21

GCT same set tax bands as

Answer 21

Income tax

Question 22

Taxable gains taxed after

Answer 22

Individual’s taxable income subjected to income tax

Question 23

Basic band rate extended if

Answer 23

Individual pays personal pension contributions and/or gift aid donations

Question 24

CGT due payment

Answer 24

31/01/2019

Question 25

Entrepreneurs’ Relief Rate

Answer 25

Available on material disposal business asset

Question 26

Conditions for ERR (2)

Answer 26

• Asset must be qualifying asset

- Election must be made by Jan 31st 2020

Question 27

Qualifying asset: (2)

Answer 27

• Whole/ part trading business
• Shares if in individual’s personal trading company and individual = employee
  Both conditions must be fulfilled for at least 1 year prior to disposal

Question 28

Shares

Answer 28

Special treatment needed because investor may have several same shares/ securities bought different times for different prices

Question 29

Disposals matched with (3)

Answer 29

• Acquisitions on same day
• Acquisitions in next 30 days
• With shares in share pool

Question 30

Proceeds for shares =

Answer 30

(Sale proceeds / No. Shares sold) x shares in match

Question 31

Principle Private Residence relief (PPR)

Answer 31

Gain from sale PPR free from CGT if lived there most period owned/ periods ‘deemed occupation’

Question 32

Deemed occupation (4)

Answer 32

• Periods absence totaling 3 years
• Periods where required live abroad for work
• Periods totaling 4 years when required work elsewhere in UK
• Last 18 months ownership

Question 33

If gains arising not covered by PPR relief

Answer 33

Taxable as residential property at 18%/ 28%

Question 34

If taxpayer has more than one residence

Answer 34

Must elect for one to be regarded as main. Other fully chargeable to CGT on any gain arising on disposal

Question 35

PPR relief =

Answer 35

((Period actual + deemed occupation) / Total period ownership) x Gain

Question 36

Rollover relief

Answer 36

Where qualifying business asset sold at gain, tax payer may rollover gain provided proceeds reinvested in replacement asset

Question 37

Gain deducted from (Rollover relief)

Answer 37

Cost new asset

Question 38

Gain rolled over becomes chargeable when

Answer 38

Replacement asset sold without further replacement

Question 39

Qualifying assets (rollover relief) (3)

Answer 39

• Land
• Buildings
• Goodwill

Question 40

Assets must be used in business of vendor

Answer 40

Immediately prior to sale and upon acquisition replacement

Question 41

Must reinvest (rollover relief)

Answer 41

Between 12 months before and 3 years after date disposal

Question 42

Partial reinvestment

Answer 42

Amount charged = lower of:

• Full gain
• Amount proceeds not reinvested

Question 43

Allowable cost wasting asset when capital allowances claimed

Answer 43

Original cost x (Unexpired portion asset length/ total asset length)

Question 44

Capital gains tax introduced

Answer 44

1965

Question 45

CGT % of direct tax revenue

Answer 45

2%

Question 46

Expenditure incurred to establish, preserve or defend title to asset =

Answer 46

Allowable deduction

Question 47

Wasting asset

Answer 47

Predictable useful life of less than 50 years. NOT exempt from CGT

Question 48

Wasting asset eg

Answer 48

patent/ copyright/ short lease

Question 49

Share pool =

Answer 49

Pool of all shares purchased in same company prior to date disposal