Capital Taxes Flashcards
When should MV be used as Consideration on CGT Comp?
On gift or sale to connected party
Who are considered Connected Parties?
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
Allowable Expenditure - how is part disposals calculated?
Cost = A/(A+B) - A = MV of part disposal B=MV of remainder
Allowable Exp - How is Assignment of Short Lease calculated?
Unwasted cost = cost x (Lease % at date of disposal)/(Lease % at acquisition date)
Special rules for Chattels?
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
Rules for Small part disposals?!
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)
Asset Damaged CGT implications
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
How can Capital Losses be relieved?
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
How are transfer between married couples treated?
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
What are matching rules for shares for individuals?
Same Day
Next 30 days (FIFO)
Share Pool
What is a takeover?
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
Takeover - A Share for Share Transaction is accounted for by?
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.
Tax Implications for a takeover - mixture of cash and shares
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)
How are QCBs treated in a takeover?
Calculated as cash would be (OG Cost x (Cash R’ved/Total Consideration) BUT not taxed straight away but frozen until QCB is sold.
Liquidation - How are payments before liquidator apptd treated
Treated as Dividend Income
Liquidation - How are payments after liqidator appointed taxed?
Taxed as Capital - CGT gain - Chargeable Gain or Loss
How to value quoted shares in a Plc?
Average of quoted prices ( ie mid price)
(H+L)/2
How can losses on unquoted shares be treated?
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
When is ER relief given?
If an individual disposes of a QBA, can make a claim to be taxed at 10%, on first £10m of gains
QBA for ER relief?
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
What is IR relief?
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
Calculate PPR Relief?
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
Leetin relief is provided after PPR Relief how calculated
Lower of £40K, PPR Relief, Gain re letting
When is somone considered UK domicile?
Of Origin - Permanent home of father
Of dependencey - up to age of 16
Of Choice - Prove to HMRC have made another country your home
