CGT Flashcards
What can be deducted from proceeds of a sale for CGT purposes?
Renovation costs - cost of enhancement
Legal fees
All costs of acquiring and selling
Can’t deduct repairs
How do you calculate a gain for CGT on residential property?
What are disposal proceeds
Deduct acquisition cost
Deduct costs incurred in arranging purchase and sale and any enhancement costs
Set off any allowable capital losses - set against gains taxable at highest rate first
Deduct annual exempt amount
Calculate tax at appropriate rate
How are losses dealt with?
Set against gains of same tax year even if takes gains below annual exempt amount - deduct full loss before use of annual exempt amount.
If gain are higher than losses can carry excess loss forward and set against gains until fully absorbed. Once claimed are carried forward indefinitely
Losses must be claimed within 4 years of end of tax year in which they are made - required even if not used in that period
If carried forward can use only enough of gain to bring him down to annual exempt amount and carry forward the rest
Can’t use spouses losses
How are gains dealt with on sale of a business?
Business asset disposal relief can be claimed = disposal of part, all, assets used wholly in connection with business
Owned for at least 2 years before date of disposal
Covers 1st £1m of qualifying gains made during lifetime
Taxed at 10%
Can use annual exempt amount
5% shareholding test as an employee or director
Business must be a trading company not an investment company.
What value is used if sale to a connected person?
The market value
How is the proportion of a gain calculated when someone has not occupied a property as their main residence for the full ownership period?
Total gain x period of occupation/total period of ownership
Can calculate using chargeable period instead =
Total gain x chargeable portion/total period of ownership
Add last 9 months of ownership to period of occupation
(Could use percentage of time to check answer)
What periods of absence are ignored when identifying periods of occupation for private residence?
Delay of 1 year between acquisition and taking up residence
Any period before 1/4/1982
Periods totalling 3 years if preceded and followed by residence and no other residence was exempt
Last 9 months of ownership - provided it was used as main residence at sometime (36 months if disabled/care home)
Periods of 4 years when employment outside uk prevented residence (no other residence exempt)
Any periods working abroad if both preceded and followed by residence
Any period of living in job related accommodation when intention is to return
How is gain calculated for a part sale of land?
A/(A+B) x original cost
A = proceeds of part sale
B = Market value of part retained
Gives deemed cost (acquisition cost) so then take sale price away from this deemed cost to get gain.
In future the deemed cost is deducted from original purchase price to give acquisition cost.
What are the share identification rules?
Disposals of shares/units of same type and class acquired at different times:
- Acquisitions on same day
- Within following 30 days
- Acquisitions in share pool - aggregates all acquisitions except those made on same day or following 30 days
How are chattels dealt with?
If disposal is less than £6,000 it’s exempt
If over £6,000 it’s the less of actual gain (use exempt amount) and 5/3rds of the excess over £6,000 (disposal value - don’t use exempt amount)
What is letting relief?
Where part of property is let as residential accommodation and the other part is owners main residence
Relief is lower of
Amount of PPR relief received (% of property used by owner apportioned to gain)
Gain made on let part of property
Or £40,000
If joint each owner is entitled to up to £40,000
If a loss is made in current tax year can it be carried forward, what about previous year
If has made gains in current year it has to be fully deducted from current gain before application of the annual exempt amount
If made in a previous tax year only needs to deduct amount of loss required to bring gain down to annual exempt amount
What acquisition cost is used for an asset acquired prior to 1/4/1982?
The value on 31/3/1982
If you have shares and property which does the annual exempt amount get deducted from first?
That giving rise to lowest tax bill i.e. residential property
Explain holdover relief
Individuals can hold over the gain by way of a gift
Transfers that attract an immediate charge to IHT qualify even if no IHT payable due to NRB
Not available in settlor interested trusts
No CGT payable at time of gift but acquisition cost is reduced by amount of held over gain (effectively means same base cost)
Only donor needs to claim if a transfer to trust otherwise donor and donee
Gifts to UK resident
Gain transferred to donee and May become chargeable when donee dispose of asset
Can claim on way into trust and also when transferred out to beneficiaries
