Capital tax - Revised

Question 1

What is capital gain tax?

Answer 1

It is tax payable on gains from whole or part disposal of an asset

Question 2

What is the main legalisation for CGT?

Answer 2

• Taxation of Chargeable Gains Act 1992

* Various subsequent Finance Act

Question 3

Definition of market value

Answer 3

Can be found in Section 272 of the TCG 1992 in relation to property it is essentially OMV at the date of sale.

Question 4

How is CGT calculated ?

Answer 4

Open market value from sale – (Purchasing cost + expenses and finance on expenses) = Chargeable amount for taxation.

Then adjusted for indexation.

Question 5

What is the rate of tax for individuals and company’s ?

Answer 5

Individuals
 non-residential property = 10% or 20%
 residential property = 18% or 28%
Higher rate taxpayers pay 20% and 28%

Companies
 19% (the Corporation Tax rate)

Question 6

What are the annual exemptions ?

Answer 6

 Individuals & most trusts qualify

 2020/21 is £12,300 for individuals & £6,150 for most trusts.

Question 7

What reliefs are available for

Answer 7

Private Residence Relief - (i) Dwelling-house used as taxpayer’s main residence including land and garden up to a permitted area of 0.5 hec.

Roll over relief
• Available to individuals etc and companies carrying on a trade who reinvest proceeds of disposal in other qualifying assets.
• No tax payable but the chargeable gain is deducted from the acquisition cost of the new asset.

Hold over relief

• Individuals who make a qualifying gift
• Works in a similar way to Roll-Over

Entrepreneur’s Relief-now known as Business Asset Disposal Relief

n For disposals by individuals, trusts etc on or after 6 April 2008.
n Disposal of all or part of a trading business or the assets following cessation
n 10% tax rate for qualifying gains up to a lifetime limit from 11 March 2020 of £1m of chargeable gains (prior to 11/3/20 was £10m).

fall in value relief?
Value of gifted property has fallen in value since the date of transfer. The amount the asset has fallen will be added onto your capital gain allowance

Incorporation Relief
 (transfer all your business assets in exchange for shares in a company)

Question 8

What are some exemptions ?

Answer 8

• Exempt persons & organisations- e.g. Crown, Local Authorities
• Exempt assets-e.g. private cars
• Exempt transactions- e.g. gift to spouse or civil partner#

Question 9

What is the difference between MV for red book valuations and MV for CGT & IHT

Answer 9

Capital tax MV does not account for the flooding of the market and also accounts for special purchasers