CGT Flashcards
What is letting relief?
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
What does gift relief cover?
Business gifts
How does double taxation relief work?
The lower of:
Tax suffered abroad and
Uk tax on foreign income/gain
is deducted from UK tax liability
What do you have to remember about the remittance basis?
You don’t get a personal allowance
What is entrepreneurs relief?
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
With shares and CGT do you include a spouse’s shares for amount of holding?
No, that is for inheritance tax
For CGT shares calculations, do you use the mid-point of the share prices or do you use marked bargains?
Mid point of share prices
Are clocks, watches and guns wasting chattel or not?
They are wasting chattel as they have moving parts
For private letting relief you only get one lot of 3 years deemed residence for any reason.
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With shares when working out their value for CGT, do you do LIFO, FIFO or average value?
Average value
What is a partially exempt transfer?
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.
What is gift relief ?
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.
With principal private residence relief, can you lob the 3 years for any reason in at any point, regardless?
Yes
For letting relief,how much do you get?
Lowest of:
PPR relief
Gain relating to letting
£40,000
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?
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
If something is more than 7 years ago then do you have to pay tax on death tax on it?
No
How do you get a 36% rate of IHT?
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
When you do a. Charitable donation, do you get 36% on PETs as well?
No, you have to pay 40% on PETs regardless
How is COST of shares worked out for CGT when they were bought on separate days?
1) shares bought same day as disposal
2) shares bought in the following 30 days on a FIFO basis
3) any other pooled shares
When working out pooled shares for CGt cost of shares, what do you do with bonus shares and rights issues?
- 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
What is rollover relief for CGT?
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
What happens with rollover relief on depreciating assets?
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
How does CGT gift relief work?
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
What is investors relief?
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.
What is deemed domiciled for CGT?
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
What are the different domicile rules for CGT?
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
