CGT

Question 1

Do you have to be living with your spouse to get the spouse exemption?

Answer 1

Yes

Question 2

What is a negligible value claim?

Answer 2

It is worth next to nothing and can be submitted to HMRC as a loss

Can be backdated to 2 years before the tax year of the claim

Question 3

What does a disposal not at arms length mean

Answer 3

When an asset is given away cheaply. The person receiving and the market value should be based on the market value and not the amount exchanged

Question 4

Explain the chattel rules

Answer 4

Step 1 Work out the amount by which the disposal exceeds £6,000.

Step 2 Multiply the figure at step 1 by x 5∕3.

Step 3 The result is the maximum chargeable gain.

Step 4 Work out the net gain using the Capital Gains Tax normal rules

Step 5 Include in your CGT calculation the lower of the net gain (step 4) and the maximum chargeable gain (step 3).

Question 5

How would a wasting asset e.g. a yacht be CGT taxed

Answer 5

If a wasting asset has a lifespan of under 50 years they are exempt from CGT

Question 6

What is the formula for part living in a private residence

Answer 6

Part of the gain may be taxable if the seller has not occupied the property as their only or main residence throughout the period of ownership. In this instance, the proportion of the gain that is exempt is:
Total gain × period of occupation total period of ownership

Exemptions:

-first year of purchase
-last 18 months
—3 years providing they had no other residence

Question 7

How do you decide which residence to make as main residence

Answer 7

Can opt for which home is main residence as long as they have lived there at some pint.

Can do this within 2 years of house being purchased and cannot be backdated more than 2 years

Question 8

When do you report a CGT loss

Answer 8

Losses must be claimed within four years of the end of the tax year in which they were made. This is a requirement whether or not the loss is used in that period.

Question 9

What is the prortionate gain figure

Answer 9

Where a disposal is only of part of an asset, the cost is calculated using an apportionment formula:

A
——
A + B

X original cost

A:part disposal proceeds

B:market value of part retained

Question 10

Explain entrepreneurs relief?

Answer 10

£10m taxed at 10% CGT

• have to own assets for 2 years
• owns at least 5% of voting rights