Capital Taxation (DVS) Flashcards
Walton v CIR (1995)
What is to be valued is the particular interest the transferor has and not the whole property.
What does the hypothetical vendor of an undivided share in land have to offer?
- a right to receive the appropriate portion of the net income pending sale of the land.
- at some future date, the appropriate share of the net proceeds of sale.
- a right to occupy unlet property jointly with other co-owners.
What is the TLATA 1996?
Trusts of Land and Appointment of Trustees Act 1996
Under what legislation would an order for sale be applied for?
Section 30 of the Law of Property Act 1925.
In what cases is an order for sale less than “highly likely” to be granted?
- where it would involve displacing a co-owner entitled to occupy the property as their main residence.
- where the purpose of the trust for sale has not been fulfilled and is still capable of being fulfilled.
What changes to taxation did The Finance Act 2022 (published 2 February 2022) introduce?
The Act announced updates in respect of the Residential Property Developer Tax (RPDT) levied on the profits of large companies, which only applies where a developer has or had an interest in land and applies from 1 April 2022.
RPDT is charged:
1. at a rate of 4%
2. on profits that arise from residential property development and exceed the annual allowance
3. where the annual allowance is £25 million (pro-rata for short accounting periods)
4. and companies must be subject to UK Corporation Tax.
What is ATED?
Annual Tax on Enveloped Dwellings
* an annual tax payable mainly by companies that own UK residential property valued at more than £500,000.
Where is the definition of the basis of value for CGT found?
Section 272, Taxation of Chargeable Gains Act 1992
https://www.legislation.gov.uk/ukpga/1992/12/contents
Where is the definition of the basis of value for IHT found?
Section 160, Inheritance Tax Act 1984
https://www.legislation.gov.uk/ukpga/1984/51/contents
Where is the definition of the basis of value for SDLT found?
Section 118, Finance Act 2003
https://www.legislation.gov.uk/ukpga/2003/14/contents
Where is the definition of the basis of value for ATED found?
Section 98(8) of the Finance Act 2013
https://www.legislation.gov.uk/ukpga/2013/29/contents
What is the definition of market value for IHT, CGT etc.?
“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 are the assumptions for IHT, CGT etc.?
Case law has established that, in arriving at market value, the following assumptions must be made:
* the sale is a hypothetical sale.
* the vendor is a hypothetical, prudent and willing party to the transaction.
* the purchaser is a hypothetical, prudent and willing party to the transaction (unless considered a special purchaser).
* for the purposes of the hypothetical sale, the vendor would divide the property, i.e. asset to be valued into whatever natural lots would achieve the best overall price.
* all preliminary arrangements necessary for the sale to take place have been carried out prior to the valuation date.
* the property is offered for sale on the open market by whichever method of sale will achieve the best price.
* there is adequate publicity or advertisement before the sale takes place so that it is brought to the attention of all likely purchasers.
* the valuation should reflect the bid of any special purchaser in the market (provided that purchaser is willing and able to purchase).
