Capital Tax Planning

Question 1

What factors need to be considered when dealing with the timing of disposals?

Answer 1

Rates of tax in different tax years.
Using losses and AEA.
Availability of the reliefs e.g. BADR an Investors relief

Question 2

What are the conditions for Business asset disposal relief?

Answer 2

Trading company
Employee of company
Five percent ownership of shares
Two years meet these conditions

Question 3

How do you calculate how many shares need to be sold in order for you to generate NO CGT?

Answer 3

You work out the gain per share.
Then you add the AEA and any b/f or cy loss.
You then divide this total by the gain you get from 1 share.

Question 4

Go through CGT and IHT when the individual is dead or alive?

Answer 4

CGT alive: Disposal at MV
Does gift relief apply and what is the effect of the relief?
Make use of losses and AEA.

CGT when dead: Disposal of an asset on death is exempt and the asset is taken at probate value.

IHT when alive: AEA for current year and precious may be available. Otherwise gift may be a PET. Is it a GWROB. Transfer may attract BPR/APR (remember donee must still own asset at donors death. Also remember taper relief. Consider NRB, but no RNRB on lifetime gifts.

IHT death: Gift on death means chargeable transfer. You should consider BPR,APR, NRB, RNRB.

Also think about non tax issues.

Question 5

What is the benefit of having a variation of will?

Answer 5

If a valid variation of will is made within two years of death, there will be no CGT disposal of the varied assets by the individual making the variation.

Instead the new beneficiary will take the assets at probate value.

You need to consider whether the new beneficiary will dispose of the assets in the forseeable future and their CGT liability position in that event.