CGT Flashcards
Pro forma for calculating taxable gain for individuals
Disposal proceeds - Cost = Chargeable gain
Less annual exemption (6000)
=Taxable Gain
CGT Rates
1- 37,700:
normal rate: 10%
residential property rate: 18%
37,701+:
normal rate: 20%
residential property rate: 28%
CGT Tax bands
-Same tax bands of income tax, first they are used in income tax then remaining band is used in CGT
-Tax bands may get extended due to GPPC or GQD
How is disposal proceed calculated?
Proceeds received less costs to sell (legal, agent, commission)
What is included in cost of asset?
Purchase price xxx
Cost to purchase xxx
Improvement cost xxx
can annual exemption be carried forward?
no
can annual exemption be used against any gain?
yes. for eg. residential property is higher rate, so we will offset against this type of gain first
part disposal, how is chargeable gain calculated?
disposal proceeds less cost of disposed part
how is cost of disposed part calculated?
Total cost x (disposal proceeds/ total MV of asset (DP+ MV of remaining)
How will base cost for remaining asset be calculated?
Total cost less cost of disposed part
if part disposal qualifies for small part disposal relief then what will be the tax treatment
In SPDR, gain of part disposal can be deferred uptil disposal of remaining asset
no gain will be calculated on part disposal
only the base cost of remaining asset will be adjusted by deducting disposal proceeds of part from the cost of total asset
This way future gain will automatically increase
what are the conditions for small part disposal?
-Asset must be land and building
-DP of part must be less than 20% of MV of whole building
-DP of this part must be less than 20,000
-DP of all land and building disposed off in this tax year should be less than 20,000.
planning points to consider when deciding to make election of small part disposal?
in disposal year:
-band extension?
-current or brought forward capital losses?
-expectation of any future capital losses?
-annual exemption?
-consider future tax rates?
-availability of funds to pay tax?
distruction of asset/ asset lost. What will be the disposal proceeds? What if there are no proceeds? What will be the date of disposal?
for CGT purpose it is treated as a disposal
if any scrap or insurance proceeds are recieved then they will be treated as disposal proceeds
if no proceeds then loss will arise
disposal date will be when insurance proceeds are received rather than when asset is destroyed
DESTRUCTION OF ASSET if capital gain arises due to scrap and insurance proceeds, can it be deferred?
gain will be chargeable however it can be deferred if PROCEEDS REINVESTED in replacement asset within 12 months
deferral of gain will have to be elected for
if whole proceeds are reinvested then whole gain can be deferred
if partially reinvested then they will be deferred partially
if insurance/scrap proceeds are reinvested partially then the gain will be deferred partially. how will gain chargeable now be calculated?
gain chargeable now will be lower of:
-cash in hand (proceeds less reinvestment)
-total chargeable gain
when gain is deferred due to reinvestment of proceeds, how is the base cost of new asset calculated?
purchase price less deferred gain
Purchase price being used as asset is replaced
Damage of asset
treated as part disposal for CGT purposes
if any proceedsare recieved they will be considered proceeds for that part
how will gain/loss be calculated for damage of asset and can it be deferred?
gain calculation: disposal proceeds less cost of disposed part
deferral: ALMOST ALL OR NOTHING
It can be deferred if 95% or more proceeds are reinvested on restorative of asset within 12 MONTHS
If less than 95% are reinvested then no deferral is available
Deferral is not mandatory, its an election
what will be the base cost after damage if gain is deferred vs its not deferred
If gain is not deferred:
Original cost less cost of damaged part + restoration costs
If gain is deferred,
Original cost less disposal proceeds received of damaged part + restoration costs
if against damage of asset no insurance or scrap proceeds are received?
NO CASH =JUST COST
no CGT will be assessed
base cost will be adjusted only
orginal cost + restoration cost
Your client vali fabrics ltd is selling land and reinvesting the proceeds in a building and some machinery, do they have any relief available?
ROLLOVER RELIEF MAY BE AVAILABLE
when business sells a qualifying asset (land&building, fixed plant&machinery, goodwill) and reinvests its proceeds in another qualifying asset (can be another type) within qualifying period (1-3 rule) then the gain on disposal can be deferred
it is available on business assets only not investment properties
what is the qualifying period for rollover relief
1-3 rule
1 yr before disposal date
3 yrs after disposal date
what happens to base cost of new asset when gain is deferred
base cost of new asset is adjusted
base cost: purchase price less deferred gain