Capital Gains Tax Reliefs Flashcards
Principal Private Residence
A taxpayer’s only or main residence, including grounds or gardens totalling up to half a hectare or such larger area as is required for the enjoyment of the house having regard to the size and character of the house.
PPR: More than one residence
Only one PPR allowed. Spouses / partners may only have one PPR between them.
If 2+ properties elect which is to be PPR within 2 years of acquisition of second property.
PPR: Deemed occupation
- The last 18 months if the property has been PPR at some time. Even if the individual has another PPR during this period.
The following only count if no other PPR
- Any period (or periods added together) of up to three years (36 months) absence for any reason.
- Any periods of absence during which the individual was required by his employment to live abroad
- Any period (or periods added together) of up to four years (48 months) during which the individual was required to live elsewhere due to his work so he could not occupy the property.
The periods of absence must usually be preceded by a period of actual occupation and followed by actual occupation. However, not required to resume residence in last two situations if terms of employment require him to work elsewhere.
PPR - Business use
If part of the property is used EXCLUSIVELY for business purposes, the gain attributable to that part of the property will not be given PPR relief.
PPR - Break down of marriage
If owner ceased to live in the property disposes of his interest to the other party. In this case still deemed to be in occupation provided
- the other party continues to live in the property and
- the owner who has left has not made an election to treat another property as PPR.
PPR - Letting relief
If a property has been occupied as a PPR letting relief may be available for that part of the gain that does not qualify for PPR.
Letting relief is the lowest of
- letting gain
- PPR relief
- £40,000
Roll over relief - basic
Replacement of business assets relief defers payment of tax on gains because the proceeds from selling one asset are reinvested when a replacement asset is acquired. The logic is that the taxpayer has insufficient funds to pay the tax. The gain on the disposal of the old asset is rolled over into the base cost of the new asset.
Who is roll over relief available for?
individuals (sole traders and partners) and companies
Conditions for roll-over relief
Both the old asset and the new asset must be qualifying business assets.
Qualifying assets include:
- Land and buildings (occupied and used for trade purposes)
- fixed plant and fixed machinery
- Goodwill (sole traders and partners only - NOT COMPANIES)
The old and new asset do not need to be the same type of asset.
Roll over relief: qualifying time period
the new asset must be acquired during a qualifying time period of one year before and three years after the date of disposal of the new asset
Roll over relief: claim must be made…
within the later of four years of the end of the tax year (accounting period for companies) in which the gain is realised or the new asset is acquired.
Rollover relief: how to calculate
1) calculate the gain
2) proceeds x
reinvested(x)
———
Taxed now x
The proceeds become the base cost of the new asset for future disposal..
Rollover relief: non business use
When an asset has non-business use, relief is only available on the business element of the gain
Technique: have two columns - one for non business and one for business and apportion disposals and costs. Rollover relief is a separate working and is proceeds of the business element less cost of replacement factory.
Rollover relief: depreciating assets
Where replacement asset is a depreciating asset, the gain is not rolled over by reducing the cost of the replacement asset. Rather it is deferred until it crystallises on the earliest of:
1. the disposal of the replacement asset
2. ten years after the acquisition of the replacement asset
3. The date the replacement asset ceases to be used in the trade.
An asset is a depreciating asset if it is, or within the next ten years will become, a wasting asset (ie an expected life of 60 years or less)
Rollover relief: Free parking
Where a gain on disposal of asset 1 is deferred against a replacement depreciating asset (asset 2) it is possible to transfer the deferred gain into a non-depreciating asset (asset 3) provided the non depreciating asset (asset 3) is bought before the deferred again on asset 2 has crystallised.
