Capital Taxes

Question 1

When should MV be used as Consideration on CGT Comp?

Answer 1

On gift or sale to connected party

Question 2

Who are considered Connected Parties?

Answer 2

Parents and their spouse, Grandparents and their spouse, Children and Spouse, Bro, Sis and spouse of husband and bro, sis and spouse of w AND business partner

Question 3

Allowable Expenditure - how is part disposals calculated?

Answer 3

Cost = A/(A+B) - A = MV of part disposal B=MV of remainder

Question 4

Allowable Exp - How is Assignment of Short Lease calculated?

Answer 4

Unwasted cost = cost x (Lease % at date of disposal)/(Lease % at acquisition date)

Question 5

Special rules for Chattels?

Answer 5

Cost or SP under £6K Special Rules not examinable
Cost and SP above £6K, Normal comp
Cost and SP less than or equal to £6K EXEMPT

Question 6

Rules for Small part disposals?!

Answer 6

No Part Disposal - Deduct Sales Proceeds from Allowable Expenditure (Small if L&B - 20% of valu of land b4 disposal AND SP from land less than £20K in tax year)
(Small for other Assets if less than or equal to 5% of value of asset b4 part disposal OR less than or equal to £3K)

Question 7

Asset Damaged CGT implications

Answer 7

No insurance Proceeds - No Disposal
Insurance Proceeds Recived - Not used in restoration - Normal part Dispsal where A=Insurance R’ved and B=Value of Damagerd Asset
Insurance used in restoration = Part Disposal unless rollover election made to deduct proceeds from cost of restored asset on sub disposal

Question 8

How can Capital Losses be relieved?

Answer 8

CY Loss against Chargeable gains if poss
No Partial claims
Carry Forward remaining losses

BFwd Losses - Offset AFTER AEA
If gains after AEA is nil then continue to CFWD

Losses in Year of Death - Carry Back 3 years
LIFO basis
Can restrict to preserve AEA

Question 9

How are transfer between married couples treated?

Answer 9

Transfers take place at NGNL
Ignore any consideration received
Only apply if living together (not separated)
Transferor deemed to dispose of asset at acquisition cost!
Spouse takes over asset at cost

Question 10

What are matching rules for shares for individuals?

Answer 10

Same Day
Next 30 days (FIFO)
Share Pool

Question 11

What is a takeover?

Answer 11

A Takeover is when a company (B) acquires shares in another company (A) by issuing shares to that companies (A) shareholders. SHARE 4 SHARE EXCHANGE

Question 12

Takeover - A Share for Share Transaction is accounted for by?

Answer 12

No CGT implications - the new shares stand in the shoes of the old shares (take on cost and date of shares) Conditions must be met:
Clearnace req from HMRC
B acquires more than 25% of A
Exchange is for genuine reasons and not to avoid tax

Shareholder can elect to be treated as a disposal for CGT reasons - this could be a good idea if the shares would be relieved for ER relief but not after the takeover.

Question 13

Tax Implications for a takeover - mixture of cash and shares

Answer 13

If cash amount is small - less than 5% of less than £3000, then no CGT implications at date of exchange

If not small >5% and >£3K, CGT implications for cash received, part disposal (Original Cost x (Cash R’ved/Total Consideration)

Question 14

How are QCBs treated in a takeover?

Answer 14

Calculated as cash would be (OG Cost x (Cash R’ved/Total Consideration) BUT not taxed straight away but frozen until QCB is sold.

Question 15

Liquidation - How are payments before liquidator apptd treated

Answer 15

Treated as Dividend Income

Question 16

Liquidation - How are payments after liqidator appointed taxed?

Answer 16

Taxed as Capital - CGT gain - Chargeable Gain or Loss

Question 17

How to value quoted shares in a Plc?

Answer 17

Average of quoted prices ( ie mid price)

(H+L)/2

Question 18

How can losses on unquoted shares be treated?

Answer 18

Can elect to offset capital loss realised on the disposal of an unquoted trading company shares to be treated as a trading loss.

Can be offset against:
Income of the tax year in which the loss arose AND/OR
the preceding tax year
MUS HAVE BEEN SUBSCRIBED FOR AND NOT PURCHASED

Question 19

When is ER relief given?

Answer 19

If an individual disposes of a QBA, can make a claim to be taxed at 10%, on first £10m of gains

Question 20

QBA for ER relief?

Answer 20

Whole or part of unincorporated business (Must have owned for 2 years)
Individual Assets in business but only if ceasing to trade
Shares in Personal Trading Company (5% interest and EE)
Indiv assets owned by indiv used in psc or partnerships, provided also disposing of shares in the company
No ER on GW transferred to close company UNLESS
Retiring partner, or own less than 5% of company or, own more than 5% but sell in 28 days

Question 21

What is IR relief?

Answer 21

Extends benefits of ER to
Unlisted trading co. shares
Subscribed on or after 17.3.2016
Held for more than 3 years from 6.4.2016
NOT EE of company
Can be claimed for disposals on/after 6.4.2019
Claim by 31.1.22 for 19/20 disposal

Question 22

Calculate PPR Relief?

Answer 22

If owner occipoed throughout - Exempt Gain
If partly absent -
Relief = Gain x (Periods of Occupation/Periods of Ownership)
Deemed Occupation = Up to 3 years any reasons
Any period if employed abroad
Up to 4 years if working elsewhere in the UK or working aboard if Self-employed
Must be actual occupation before and after
Condition relaxed if reoccupation prevented by terms of employment
Last 18 months Deemed occupation unconditional

Question 23

Leetin relief is provided after PPR Relief how calculated

Answer 23

Lower of £40K, PPR Relief, Gain re letting

Question 24

When is somone considered UK domicile?

Answer 24

Of Origin - Permanent home of father
Of dependencey - up to age of 16
Of Choice - Prove to HMRC have made another country your home

Question 25

when is someone DEEMED UK domicile?

Answer 25

Long Term Resident - UK Resident for 15 out of last 20 tax years
Unless not UK R since 5 April 17

Formerly Domicilied Resident -
Born in UK, Domicile of origin is UK AND UK Resident in last tax year