Capital taxation Flashcards
How does Council Tax work?
Annual fee that is payable to local council which contributes towards local services such as bin collection, police and fire services, leisure and recreation
How does it differ from business rates?
It is paid on domestic property as opposed to non-domestic property
How is Council Tax calculated?
Properties are placed into 1 of 8 CT bands based on the value of the property as at 1 April 1991 but taking account of its physical state and its locality as at 1 April 1993
What bands exist?
A-H
What Council Tax Reductions exist?
- Single person discount
- Student discount
- Short/long term empty discount
How can Council Tax be challenged?
A challenge is lodged with the assessors
When might a property be revalued for Council Tax purposes?
- Material reduction in value - part has been demolished, change to locaility or physical state
- Material increase in value - building, engineering or other works that have been carried out to the property
Who pays Council Tax?
The occupier of domestic property (owner or tenant)
What valuation dates apply for Council Tax?
- 1 April 1991
- Takes account of locaility and physical state as at 1 April 1993
What type of purchase price discounts are not taken into account in Council Tax valuations?
Right to Buy
When and how are new build properties added to the Council Tax list?
- When they are completed
What evidence can be used in a Council Tax challenge?
- Evidence of similar properties in lower bands
- Sales evidence
- Evidence of change to the property
Who deals with Council Tax challenges?
Scottish Assessors
How and who can you appeal a Council Tax challenge decision to?
- Prepare case
- Appeal to Scottish Assessors
Under what circumstances may Capital Gains Tax be payable?
When you dispose of an asset and make a gain
What is the definition of market value under the Taxation of Chargeable Gains Act 1992?
The definition of Market Value for taxation is the price which the property might reasonably be expected to fetch if sold in the open market at that time, but that price must not be assumed to be reduced on the grounds that the whole property is to be placed on the market at one and the same time
What rules apply if a client sells their home/live abroad/are a company registered abroad?
UK residents are still obliged to pay CGT even if the assets are abroad or you live abroad
When is CGT not paid?
- Primary residence if its been your sole residence
- ISA or PEP
- Government Bonds
- Betting wins
Is CGT payable on gifts?
- Don’t pay CGT on assets that you give or sell to your spouse
- Unless you are seperated and did not live together during the tax year
- Or you give it to them for their business to sell
What tax reliefs are available?
How is CGT calculated?
- Only pay CGT on amounts above your tax free allowance
How is CGT calculated if a property is jointly owned?
Pay on your share only
What costs can be deducted from CGT liability?
- LBTT
- Estate Agent & Solictor Fees
Does CGT apply to buy-to-let properties?
Yes
Is CGT paid on property owned and sold by a limited company?
No you would pay corporation tax
When is CGT paid after a property is sold?
Need to report the disposal within 60 days of the date of completion
What CGT rate is currently payable?
- Basic Rate Tax - 10% or 18% on resi
- Higher Rate - 20% or 28% on resi
What rules apply if a CGT loss needs to be reported?
- Amount is deducted from the gains you made in the same tax year
- If your total taxable gain is still above the tax-free allowance you can deduct unused losses from previous tax years. If they reduce your gain to the tax-free allowance, you can carry forward the remaining losses to a future tax year
When is IHT payable?
Tax on the estate (the property, money and possessions) of someone who has died
When is IHT not payable?
- Estate is below threshold
- Leave estate to spouse, civil partner or charity
What is the current IHT rate?
- 40%
- 36% if 10% of net value estate is left to charity
What reliefs and exemptions apply?
- Taper releif
- Business releif
How do gifts work for IHT purposes?
Gifts given within the last 7 years of your live may be liable for IHT
What is probate?
Probate is the legal right to deal with someone’s property, money and possessions (their ‘estate’) when they die
When is it needed?
If you are named in someone’s will as an executor
When is it not needed?
All property and bank accounts of the person who has died were held jointly with someone who is still living
What is ‘prudent lotting’?
The concept that the vendor sells the property in the lots that will command the highest price
What is the Annual Tax on Enveloped Dwellings?
Annual tax payable companies that own UK residential property valued at more than £500,000
Tell me about IRC v Clay.
Tell me about Walton v IRC.