Captisl Gains Tax Flashcards
What is cgt? What are the high level rules
CGT is a ‘tax charged on disposal of certain capital assets’
A chargeable disposal of a chargeable asset by a chargeable person
Where an asset it sold the date of the disposal for cgt is the date the contract becomes binding, not the date funds are received.
Transfer between spouses or civil oartners are treated on a no gain no loss basis
Separated spouses have 3 years after the tax year they stop living together ti make no loss no gain on cgt
When is no cgt is due, as IHT is now due
Valuation on disposal
Where a chargeable disposal takes place, the value will usually be the price paid between parties
Main exemption is where transaction is between connected persons.
This is known as ‘not at arms length transactions’
Chargeable and exempt assets
Exempt - private motor vehicles, ns&I and premium bonds, gov bonds (gilts) and
& ** most corporate bonds owned by individuals ** not exempt in indirect inv
Foreign currency for personal use
Chattels and chattel relief for cgt
A chattel is a tangible movable property
Where the value does not exceed 6000 the chattel exemption applies, where it is over this tax may apply to the lower if 1.666x gain over 6000 or the actual gain
Private residence relief
Your private residence is exempt from CGT
Where have more than one private property you can elect which one gets relief, if do not elect will be picked on evidence
If a married couple only one residence can be subject to the relief
Where property not been lived in for whole ownership the exemption may be reduced if eliminated…
Total gain X (period occupation/total period of ownership)
HMRC accepts be times where cannot live in property and this can be ignored
-up to one year between purchasing and moving in
-last 9 month of ownership
-any period before 1982.
-any period living in job related accom as long as intented to return to property.
-any period working abroad as long as followed by occupation
Where you let out part of your house
The part that you let out is not exempt from cgt
The part let will be exempt to the lower of 40k or the exemption on part occupied by owner
Handling part sales / part disposals
An example is where you sell part of a field
Formula =
(Sales proceed of part sold / current value of whole asset) X original cost of whole asset
Calculating the amount to be taxed for CGT
Determine the disposal proceeds
Deduct the acquisition cost
Deduct any cost in arranging for the purchase, sale or any costs of enhancements
Offset any capital losses - losses from previous year can be carried forward 4 years and the end of the tax year they fall - only sufficient loss to bring amount down to annual exemption are needed
Deduct annual exemption - 6000
Apply the right tax(s) 10% BRTP 20% HRTP plus 8% property surcharge
Relief against CGT
Business asset disposal relief
Where individual sells if disposed of part of a business they have owned for least 2 years, bring tax down from 20% to 10% overall save of 100k
To qualify business meet number of test around 20% rule
Holdover relief
Gain on hold when disposing asset, cgt is not avoided just transfers to when other person disposes
Business rollover relief
Relief available where sell asset to buy replacement assets used in the business
Reinvestment into EIS or SEIS-
Made 1 year before and held for least 3 years.
For EIS - the gain is deferred if reinvested
For SEIS- if capital gains reinvested in SEIS- then 50% is entirely exempt and 50% have to pay then cannot rollover
Sale of shares for cgt
Where shares are sold the purchase price will be matched against:
Any purchases of the same share on the day
Any purchases of the same share in the following 30 days
The average purchase price of all remaining shares in the ‘share pool’ of the same type of shares
Shares purchased more than 30 after after the sale
When is payment if cgt due?
31of January following the tax year in question
How long can losses be carried forward
Indefinitely if registered with hmrc within 4 years
Is a loss and a gain occurs in the same year then have to use all loss
Can you carry forward the annual allowance of 6000
Nope
Equity unit trust and capital gains tax, what total value of units should be advised to sell?
Divide 6000 (cgta) by the gain of the trust/fund
Then apply this % to the total value of the trust, this is the advised amount
