CGT Flashcards
What is exempt from CGT?
Wasting chattels
- moveable property with life of less than 50 years
- cars, boats, watches, farm animals
Non wasting chattels under £6k
What are exempted disposals for CGT?
Transfers on death - IHT
Transfers between spouses
Transfers to charities
When is CGT due?
31 Jan following tax year made
For gains made on property, 60 days after completion
What can be deducted from gains?
Cost of acquisition
Cost of enhancements - must he part of assets when sold
Costs relating to title
What reliefs are available?
Private residents relied
Business asset disposal relief
Hold over relief
Incorporation relief
What is private residence relief?
Exempts part or all of gain on residential home. Reduced gain.
Gain x (period of occupation/period of ownership)
If lived in all period 100 exempt and no gain
Deemed occupation
Last 9 months ownership always treated as deemed occupied, must have lived there at some point.
Any period of absense for any reason for up to 3 years
Where abroad by reason of work, unlimited
Absent due to working elsewhere - limited to 4 years
Can be applied cumulatively
What is business asset disposal relief?
Available for gains made by person on sale or gift of certain business assets
Includes:
- all or part of trading business carried on as sole trader or partnership for at least 2 years before disposal
- shares in trading company if person owns at least 5% of the ordinary voting shares of the company (personal company) and was an officer or employee of the company for 2 years before sale
- assets owned and used by personal trading company or partnership in 2 years before disposal
Amount of relief
- CGT payable at 10% on qualifying gains
- lifetime limit of £1,000,000
What is hold over/gift relief?
Person can give away business assets without paying CGT. Donor and donee agree to defer gain. When donee disposes will be charge to CGT on their gain and the donors deferred gain.
Done by calculating donors gain (market value - acquisition cost) to arrive at donors base cost. This is used to calculate donees gain on disposal.
Donees gain = proceeds of sale - base cost = charge.
Base cost is market value at time of acquisition - holdover gift relief
What assets qualify for hold over relief?
- assets used for purposes of trade or profession carried on by donor or their company
- shares in unquoted trading company
- shares in donors personal company
- assets than qualify for agricultural property relief
What is replacement of business asset relief? (Roll over relief)
Sole trader or partner can defer gain on disposal of qualifying business asset provided proceeds reinvested in other qualifying assets. Also available to companies, differing charge to corporation tax on the gain.
Reinvestment must be within 1 year before or 3 years after asset sold. Can elect to defer the gain on the previous building.
Full relief only available if all proceeds reinvested, any proceeds retained are chargeable.
Subtract gain from acquisition from cost of new asset.
What is incorporation relief?
Defers gain. Applied where sole trader or partner transfers business or partnership as a going concern to a company.
Gain deferred by subtracting gain from acquisition cost of shares received in exchange for business interest.
What is enterprise investment scheme reinvestment relief?
Person can defer CGT on any chargeable gain by investing in shares in qualifying unquoted trading company either up to 1 year before or 3 years after gain made.
Gain chargeable once EIS shares sold
What is the CGT annual exempt amount?
£3,000
What are CGT rates?
Depends on income.
Basic - 10%
Higher- 20%
Gains from residential property
Basic - 18%
Higher - 28%
