CGT

Question 1

What is letting relief?

Answer 1

When a property has been occupied as a PPR, letting relief may be available for that part of the gain which does not qualify for PPR relief.

Letting relief is the lowest of:

Letting gain
PPR relief
£40k

Question 2

What does gift relief cover?

Answer 2

Business gifts

Question 3

How does double taxation relief work?

Answer 3

The lower of:

Tax suffered abroad and
Uk tax on foreign income/gain

is deducted from UK tax liability

Question 4

What do you have to remember about the remittance basis?

Answer 4

You don’t get a personal allowance

Question 5

What is entrepreneurs relief?

Answer 5

10% CGT on disposal of a business or disposal on an asset on cessation of a business.

Higher rate for non-residential property gains is 20%

Has to be unincorporated

If sale of shares, must be an employee and have a 5% holding which has been held for two years from disposal (since start of 19/20 tax year) or one year prior to this. Hi

Question 6

With shares and CGT do you include a spouse’s shares for amount of holding?

Answer 6

No, that is for inheritance tax

Question 7

For CGT shares calculations, do you use the mid-point of the share prices or do you use marked bargains?

Answer 7

Mid point of share prices

Question 8

Are clocks, watches and guns wasting chattel or not?

Answer 8

They are wasting chattel as they have moving parts

Question 9

For private letting relief you only get one lot of 3 years deemed residence for any reason.

Answer 9

-

Question 10

With shares when working out their value for CGT, do you do LIFO, FIFO or average value?

Answer 10

Average value

Question 11

What is a partially exempt transfer?

Answer 11

A transfer during life from one individual to another. It is treated as exempt during the lifetime of the transferor. If the transferor survives 7 years from making the transfer, the PET is an exempt transfer and no IHT is payable. If they die within 7 years then it is a chargeable transfer and IHT may be payable.

Question 12

What is gift relief ?

Answer 12

A claim may be made for the gain arising on a gift of a business asset to be deferred until the recipient of the gift disposes of the asset at a later date.

Question 13

With principal private residence relief, can you lob the 3 years for any reason in at any point, regardless?

Answer 13

Yes

Question 14

For letting relief,how much do you get?

Answer 14

Lowest of:

PPR relief
Gain relating to letting
£40,000

Question 15

If I was to pay for Cammie’s school fees of £100,000 a year out of my disposable income of £350,000 a year from the age of 3 to 10, would I have to pay any lifetime / inheritance tax on these?

Answer 15

NO, because they are exempt as they are ‘normal expenditure out of income’.

• it is paid out of my income
• I am left with sufficient income to maintain my usual lifestyle since I have surplus of £250,000pa
• it is part of a regular pattern of giving

Question 16

If something is more than 7 years ago then do you have to pay tax on death tax on it?

Answer 16

No

Question 17

How do you get a 36% rate of IHT?

Answer 17

If you make a charitable donation more than 10% of the net chargeable estate - I.e. total the chargeable estate not including the charitable donation. Add on the charitable donation. If the charitable donation is more than 10% of the chargeable estate+the charitable donation, you get 36% rate

You do all the death tax calculations apart from the RNRB and the actual charity donations to get the actual chargeable estate Amon t

Question 18

When you do a. Charitable donation, do you get 36% on PETs as well?

Answer 18

No, you have to pay 40% on PETs regardless

Question 19

How is COST of shares worked out for CGT when they were bought on separate days?

Answer 19

1) shares bought same day as disposal
2) shares bought in the following 30 days on a FIFO basis
3) any other pooled shares

Question 20

When working out pooled shares for CGt cost of shares, what do you do with bonus shares and rights issues?

Answer 20

• bonus shares are free, deemed to have been acquired on same date as the original shares at nil cost
• rights issues are deemed to have been acquired in the same date as the original shares

Question 21

What is rollover relief for CGT?

Answer 21

It defers the gain on sale of qualifying BUSINESS assets where the proceeds of sale are reinvested in replacement qualifying assets. The relief works by rolling over the gain into the base cost of the replacement asset. It is available to both individuals and companies.

Both old and new assets must be qualifying assets used in the trade of the taxpayer:

• land and buildings
• fixed plant and machinery
• goodwill, individuals only, not companies

The replacement asset must be acquired in the period one year before to three years after the date of disposal of the old asset

Question 22

What happens with rollover relief on depreciating assets?

Answer 22

It is not used to reduce base cost but instead it is ‘frozen’ until the earliest of:

• disposal of replacement
• 10 years after the acquisition of the replacement
• the replacement asset is ceased to be used in the taxpayers trade

Depreciating asset is 60 years life or less

Question 23

How does CGT gift relief work?

Answer 23

Normally a gift of an asset is deemed market value. However, CGT gift relief is available to defer the gain on gifts of business assets. The relief works by deducting the GAIN from the BASE COST of the gifted asset for the donee.

qualifying assets for CGt gift relief are;

• assets used in a business carried on by the donor of by the donors personal company (at least 5% voting rights)
• shares or securities in a trading company where either the shares are:
• unquoted or
• the donees personal company

Gift relief is not available where the DONEE is a company

Question 24

What is investors relief?

Answer 24

10% CGT rate on gains up to £10m in a lifetime in disposals of shares by an individual that:

• were bought new
• in an unlisted trading company
• issued on/after Paddy’s day 2016 and held for at least 3 years from 6/4/16.
• held for at least 3 years continuously at disposal.

Question 25

What is deemed domiciled for CGT?

Answer 25

When the individual:

• has been resident in the UK for at least 15 of the last 20 tax years, UNLESS they are not UK-resident in the current tax year and have not been UK resident in any tax year from 17/18.

OR

• Was born in the UK, had a domicile of origin in the UK and is UK resident in the tax year

IHT is slightly different

Question 26

What are the different domicile rules for CGT?

Answer 26

1) uk res uk dom = worldwide gains arising taxable
2) uk res non-Dom = worldwide arising OR remittance basis
3) non-res = no gains liability APART from property