CGT 18 Options & other Intangible Assets Flashcards
Intangible assets are ….
Goodwill is a…
assets that cannot be seen, touched or moved. Shares and leases are intangible assets.
chargeable asset for CGT purposes for individuals.
The sale of an option …..
will give rise to a chargeable gain. If the option is a wasting asset (useful life of not more than 50 years), the allowable base cost is depreciated over time on a straight-line basis.
A grantor has a capital gain on the grant of an option.
In the case of a ‘call’ option ….
the grantor has a capital gain on exercise. The grant and
exercise of the option are treated as one transaction for CGT. The grantor receives credit for any tax paid when the option was granted. The grantee’s base cost is increased by the
amount paid for the option.
A grantor has a capital gain on the grant of an option.
In the case of a ‘put’ option ….
In the case of a ‘put’ option, the grantee will have a gain when the option is exercised.
The grantee’s base cost is increased by the amount paid for the option. The grantor’s base cost is reduced by the amount received for the grant of the option. Again, credit is
available for any tax paid when the option was granted
Profits on the sale of patent rights ….
are charged to income tax as miscellaneous income. The profit is spread evenly over six years. An election can be made to tax all of the profit in the year of sale.
The sale of a copyright…
may give rise to a chargeable gain. If the life is 50 years or less it will be a wasting asset.
No gain arises on the assignment of a debt by ….
the original creditor. Gains on purchased debts are chargeable.
Debts on securities are ….
chargeable to CGT. There are exemptions for securities which are QCBs. A debt on a security is broadly defined by case law as loan stock, issued by an institution, carrying a commercial rate of interest, which is marketable and held as an
investment
‘Securities’ includes …
any shares or loan stock.
Gilt-edged securities are…
always exempt assets for CGT purposes.
If a taxpayer makes a loan to a trader and that loan becomes irrecoverable ….
the amount of the capital which is irrecoverable can be treated as a capital loss. The loss arises either in the year of the claim or either of the two preceding years.
