CGT II Flashcards
What is the Total Taxable Gain?
After deductions and the AE have been calculated
What is the Total Taxable Chargeable Gains?
After deductions, AE and Losses
What tax rate do Basic Rate Taxpayers pay for Capital Gains Tax (CGT)?
18%
Basic Rate Taxpayers qualify if their Taxable Income plus total taxable chargeable gains is less than £37,700.
When do Higher and Additional Rate Taxpayers pay 24% CGT?
When Taxable Income exceeds the basic rate tax threshold of £37,700
This includes situations where the combined total of Taxable Income and gains exceeds the threshold.
What happens if an individual’s Taxable Income is less than £37,700 but combined with gains exceeds this threshold?
The part of the gains within the unused part of the basic rate tax band is charged at 18% and any part that exceeds the threshold is charged at 24%.
This applies to Higher and Additional Rate Taxpayers.
What is the effect of Business Asset Disposal Relief?
It reduces the higher rate of Capital Gains Tax (CGT) from 24% to 18% for the taxable chargeable gain
What does a qualifying disposal include?
- It includes all or part of a trading business
- assets in a business that used to trade
- shares in a trading company
- shares in a company that used to trade.
What are the requirements for a trading business qualifying for disposal relief?
The business must have been owned for at least two years prior to the date of disposal.
What are the requirements for assets in a business that used to trade?
The business must have been owned for at least two years before it ceased to trade, and the assets must have been used in the business when it ceased to trade. They must be disposed of within 3 years of the business ceasing to trade.
What are the requirements for shares in a trading company qualifying for disposal relief?
The company must have been a trading company for at least two years before it ceased to trade, shares must have been held for two years, and the person disposing must have been an officer/employee holding at least 5% of ordinary voting shares.
What are the requirements for shares in a company that used to trade?
Shares must have been owned for at least two years before the company ceased to trade, and the person disposing must have been an officer/employee holding at least 5% of ordinary voting shares for at least two years before the company ceased to trade. Shares must be disposed of within 3 years of the company ceasing to trade.
What is the lifetime allowance for Business Asset Disposal Relief?
Each individual has a lifetime allowance of £1 million, where the first £1 million can be charged CGT at 18%.
What is the CGT rate for amounts exceeding the lifetime allowance for BADR?
Anything more than the lifetime allowance is charged at 24%.
What is Investor’s Relief?
Reduces rate from 24% to 18% for gains arising on disposals of qualifying shares subject to a lifetime limit of £1 million.
What are the qualifications for shares under Investor’s Relief?
Shares qualify if they are:
- fully paid ordinary shares issued for cash
- the company is a trading company or holding company of a trading group
- none of the company’s shares are listed
- shares held for at least three years since 6 Apr 2016
- the individual is not an officer or employee of the company
What is Replacement of Business Assets Relief/rollover relief?
Taxpayer can elect to postpone the CGT liability on the sale of an asset by rolling over the gain into the replacement asset.
The new asset need not necessarily be of the same type.
How is the acquisition cost of the replacement asset affected under Replacement of Business Assets Relief?
The acquisition cost of the replacement asset is reduced by the amount of the gain being rolled over.
Can the annual exemption be used to reduce the gain rolled over under Replacement of Business Assets Relief?
No, the annual exemption cannot be used to reduce the gain rolled over.
What is Gifts of Business Assets Relief (‘Hold-Over Relief’)?
Applies to transactions at undervalue or gifts where the market value rule will apply.
What is the tax liability for the donor under Gifts of Business Assets Relief?
The donor will have no liability to CGT, but the donee’s acquisition cost for CGT purposes is reduced by the amount of the donor’s deemed gain.
Can the annual exemption be used to reduce the gain rolled over under Gifts of Business Assets Relief?
No, the annual exemption cannot be used to reduce the gain rolled over.
What applies to the gift element in a transaction at undervalue under Gifts of Business Assets Relief?
Hold-over relief will apply to the gift element, i.e., the difference between price paid and market value.
What is the formula to calculate the available NRB for a Lifetime Transfer?
Available NRB for a Lifetime Transfer = £325,000 – Cumulative Total
What is Business Property Relief?
Business Property Relief provides 100% relief for:
- Business or interest in a business
- Shares in an unquoted (not listed) company
- Land or buildings, machinery or plant owned by a transferor for business purposes
