CGT

Question 1

What is rollover relief? How does it work

Answer 1

The gain on the disposal of a qualifying business asset can be rolled over into the acquisition cost of a qualifying replacement asset.

Tax is delayed as the gain that arises will offset the cost of the new/replacement asset, so that when the asset is disposed of in the future the gain is larger

Question 2

What are the assets which qualify for rollover relief?

Answer 2

Both the disposed-of asset and the
replacement asset must be qualifying
business assets:
• Land and buildings used for trading
purposes
• Fixed plant and machinery
• Goodwill (not for companies)
•Ships, spacecraft, etc.
The old and new assets do not have to be
the same type of asset.

Question 3

What is the qualifying period for rollover relief?

Answer 3

The replacement asset must be acquired
within the qualifying period:
• Between one year before and three years
after the disposal of the old asset.

The claim for rollover must be made within the
later of: four years from the end of the tax
year (accounting period for companies) in
which the gain is realised; or the new asset
is acquired.

Question 4

What happens if only part of the proceeds are reinvested for rollover relief (i.e. the new asset cost is <
than the old asset proceeds)?

Answer 4

Then full rollover relief is not available. A gain arises as the full proceeds are not invested. The gain arises at the lower of the following amounts:

• the gain on disposal of the old asset;
• the amount of the sale proceeds not invested

The amount of relief allowed is the amount that should be deducted of the new asset

The base cost of the new asset is reduced by the amount of the gain that can be rolled over (whatever is left).

Question 5

How to apply for rollover relief on disposed assets which have been used for business and non-business use?

Answer 5

Only the proceeds relating to the business proportion is eligible for rollover relief.

Split the proceeds and
allowable cost for the initial
disposal on a pro-rata basis
between business and nonbusiness
use, and then deduct the cost of the new asset from the proceeds of the

Question 6

How to apply rollover relief to replacement assets which have both a business and non business proportion

Answer 6

The relevant replacement cost is only the
business proportion.

Therefore must Compare this to the proceeds
of the original asset to calculate the rollover relief available on the original disposal.

Question 7

What is a depreciating asset and how is it treated for capital gains tax?

Answer 7

An asset with UEL of less than 60 years

If the replacement asset is a depreciating asset, the gain is not deducted
from its cost. Instead, it is deferred until the earliest crystallisation event:
• The depreciating replacement asset is disposed of, or
• The depreciating asset ceases to be used in the trade, or
• Ten years elapse from the acquisition of the depreciating asset

Question 8

What happens when you apply gift relief?

Answer 8

The gain on gift of a business asset can be deferred until the asset is disposed of by the recipient. Liability for the gain moves with the asset

Question 9

What assets is gift relief available on?

Answer 9

1) Assets used in a business carried on
by the donor or in a company which the donor owns at least 5% of the voting rights; or
2)Shares or securities in a trading company where either
• the shares are unquoted; or
• the company is the donor’s personal
company.

Question 10

What are the conditions for applying gift relief? (aside from it meeting the qualifying assets criteria?

Answer 10

The donor must be an individual. It is not available for companies.

An election to claim this relief must be made by the donor and recipient within four years after the end of the tax year.

Question 11

How is gift relief applied?

Answer 11

Same way as rollover relief. The gain will be offset against the cost of the new asset acquired. (unless it meets the criteria to limit the gain)

Question 12

When would there be a restriction on gift relief?

Answer 12

When the gift is shares in a company which were the donors at any time 12 months prior to the disposal. In this case the gain would be calculated by multiplying the gain again the fraction of: chargeable business assets / chargeable assets.

Question 13

Hwen would a gain not simply be calculated as sale proceeds less cost?

Answer 13

• When the transaction is not at arms length and thereofre market value should be used
• When there is a part disposal of the asset
• when the asset is used for both business and non-bus use and has to be split.

Question 14

How do you treat enhancement expenditure on an asset?

Answer 14

This would be reflected in the value of the asset, ie it would increase the costs of the asset if it is still in existence when it is disposed of

Question 15

How do you calculate a gain if there is a part disposal of the asset? (eg 3 out of 9 hectares of land_

Answer 15

proportionate the MV of the asset disposed of over the total MV of the asset disposed of, plus the MV of asset retained.

Question 16

When can you apply for Private residence relief? What is the special rule?

Answer 16

You can apply and claim this when a residence has been used as an individual’s main residence. The portion of the residence which is used as the main residence may be claimed as relief

Special rule is that an extra 9 months can be claimed as the private residence if the residence has EVER been considered the primary residence

Question 17

When is the due date for paying CGT?

Answer 17

The 31st January following the end of the tax year

Question 18

When do you pay CGT in installments?

Answer 18

When the gift is:

• Land or shares in a company out of a controlling company
• shares in an unqoted company

Question 19

When is tax due on a UK residential property

Answer 19

You must submit the land return and a payment on account within 30 days of the contracts been exchanged for the residential property

Question 20

What is the gain when there is a transfer of assets between spouses?

Answer 20

The transfer will take place on a No gain no loss basis

Question 21

What is the cost when the asset is disposed to a third party but originally acquired from your spouse?

Answer 21

The deemed acquisition cost will be the original cost to the first spouse / civil partner

Question 22

What is the costs of shares when you dispose of certain shares?

Answer 22

Consider the cost of shares disposed to be the costs in the following order:

• Any acquisitions made on the same day
• Acquisitions made in last 30 days (FIFO basis)
• Create a s.104 pool and calculate the weighted average cost (of shares of same class)

Question 23

What if there is a gift of quoted shares for CGT purposes?

Answer 23

You would calculate the MV of the shares to be the average of the quoted price range

Question 24

What is letting relief and when can you claim it?

What is the amount you can claim?

Answer 24

If the property has been occuiped as private reisdence but part of the property was let out, you can claim letting relief on the part of the property which was let out.

It is not available unless the owner is also using the property as their main residence.

Letting relief is the lowest of:

• Letting gain (ie gain attributable to portion let out)
• PRR
• 40k GBP