CGT I Flashcards
When is the tax payment due following a chargeable disposal (BADR?)?
On or before 31 Jan following the tax year in which the disposal occurs
What triggers CGT?
A chargeable disposal of a chargeable asset by a chargeable person which gives rise to a chargeable gain
Define Chargeable Disposal.
Sale or gift of an asset during a person’s lifetime
No chargeable disposal at death
Define Chargeable Asset.
All forms of property except certain exemptions
What does not count as a chargeable asset?
- Prinicpal Private Residence if they have occupied it as their only or main residence during the whole period of ownership
- Motor cars for private use
- Govt Securities, National Savings Securities, ISAs, Life Assurance Policy
- Cash (pound and foreign)
What is the exemption period in relation to Prinicpal Private Residence?
The property will be exempt for the last 9 months of ownership, even if they were not in actual possession
What determines which residence is the PPR when there are multiple homes?
Question of fact as to which of the residence is the PPR - married couples can only have one between them
What is a Chargeable Gain?
Consideration received for disposal.
What is exempt from being a chargeable gain?
- Disposals to charities are exempt.
- DIsposals to spouses are exempt
How is Gain calculated?
Consideration Received – Allowable Expenditure (cost) = Gain.
How is gain calculated for disposals at arm’s length?
Consideration received will be the price paid by the buyer when the asset is sold.
How is gain calculated for disposals between connected persons?
HMRC deems the seller to have received market value irrespective of actual sale proceeds.
Who are considered connected persons?
Relatives and spouses of relatives.
How is gain calculated for disposals at an undervalue?
For CGT purposes, sale is deemed to be at market value.
Will HMRC substitute market value if the seller made a bad bargain?
No, HMRC will not substitute market value if the seller has simply made a bad bargain.
How is gain calculated for disposals as gifts?
Donor is deemed to have received the market value of the asset at the date of the gift.
What constitutes Initial Expenditure?
Initial Expenditure includes cost price and incidental costs of acquisition (Lawyers, surveyors).
What is Subsequent Expenditure?
Enhancing value of asset, establishing, preserving, or defending title.
Not repairing
What is Disposal Expenditure?
Agents’ commission etc.
When can capital losses be used?
When the cost of an asset is greater than the consideration received for it on disposal - losses made in the same tax year can be set off against any capital gains in the same tax year first - if insufficient gains, acn also set off losses against future tax years (no time limit)
What is the Annual Exemption?
Every individual is entitled to an annual exemption of gains which they are entitled to make tax free per year - currently £3,000.
