Ch 12: CGT reliefs Flashcards
What is the criteria for rollover relief (3 items)?
- Reinvested within 12 months before, 36 months after disposal
- Use in trade
- PPE qualifies - land + buildings, fixed plant + machinery, leases
How many CGT loss reliefs are there and what are they?
There are 8 CGT reliefs:
Eliminates the gain:
- Principal private residence (PPR)
- SEIS reinvestment relief
Reduces the CGT %
- Entrepreneurs relief
- Investors relief
Defers the gain
- Rollover relief
- Gift relief
- Incorporation relief
- EIS reinvestment relief
What are the steps to CGT with reliefs?
- Calculate the gain
- Consider the relief
- Deduct loss relief
- Deduct AEA
- Calculate CGT
- Calculate the base cost of asset as necessary
When does PPR apply?
Sale of any main residence with grounds of up to 1/2 hectare is exempt from CGT
*if lived in the house for whole period of ownership = exempt
PPR - what part of the gain is exempt if there was part occupation?
Gain x period of occupation (actual + deemed)/ total period of ownership
What is considered ‘deemed’ occupation (4 things)?
- last 18 months of ownership (must have occupied the entire house at some point in the past)
- Up to 3 years for any reason (must have lived in the house BEFORE and AFTER absence)
- Up to 4 years when the employee was required to work elsewhere in the UK (must have lived in the house BEFORE absence)
- Any period when the employee required to work outside the UK (must have lived in the house BEFORE absence)
What happens to PPR if an individual owns more than one property?
They must elect for one to be their main residence within 2 years of commencing occupation of the second property
What happens to PPR for married couples?
They can only have one main residence between them
What happens to PPR if part of the residence is used for business?
You can’t use deemed occupation rules where the PPR is partly occupied and partly used for business or let out - you don’t get PPR on the business part
Who is letting relief available to?
Available to the owner of the main residence in addition to PPR
What value is used for letting relief?
It is the LOWER of:
- gain in let period = gain x month rented/ total months owned
- gain exempt under PPR rules
- £40,000
What happens to PPR with tax years of non occupation?
These years reduce the amount of PPR relief available and therefore increase the taxable gain on the disposal of the property
When can tax years of non occupation arise?
Can only arise for taxpayer with a property in a country other than that in which they or their spouse tax resident
What are the conditions for PPR to apply post 5 April 2019 to tax years of non occupation?
- They were resident in that country during the tax year
- They stayed in property overnight > 90 days in the tax year
How is rollover relief given for reinvestments in NON-depreciating assets?
Deduct the deferred gain from base cost of replacement asset
How is rollover relief given for reinvestments in depreciating assets?
Calc of rollover relief is the same as non-depreciating asset, but the gain is frozen and only chargeable at the earliest of:
- 10 years from date of purchase
- Date replacement asset ceases to be used in trade
- Disposal of new asset
What happens to rollover relief if there is non-business use of the asset?
It is reduced if either the original or replacement asset is partly non-business use - time apportion for time used in business or apply the business %
*Do 2 gains calcs - business & non-business
When is gift relief available?
On the gift of certain assets from one UK resident person to another
What qualifies for gift relief (4 things)?
- chargeable assets used in a business
- shares in trading company (need a minimum of 5% holding if quoted)
- Any asset with immediate IHT charge
- Any asset transfer which qualifies for BPR and APR
How much is the gift relief under normal situations?
- If no cash received then all gains deferred
- If cash is received = proceeds - allowable cost = gain less gift relief = amount to tax now
What cost figure do you use for gift relief if there was a gift or a sale at under value?
Gift - use original cost
Sale @ under value - use amount paid
What is the gain calculation restriction for gifting shares (giving away shares)?
Gain x chargeable business assets/ chargeable assets (found in SoFP)
- chargeable assets includes any asset that if sold would be subject to CGT
- chargeable business assets exclude non-business assets like paintings, vases, investments
What qualifies for entrepreneurs relief?
An ownership period of > 2 years on qualifying asset disposals
What is a qualifying asset disposal for entrepreneurs relief (4 things)?
- the whole or substantial part of an unincorporated business
- assets of an unincorporated business sold < 3years after cessation of trade
- shares in a trading company where you are an employee and have > 5% (or they are EMI shares)
- associated disposals where selling >5% of shares in the business at the same time
What qualifies for investors relief (3 things)?
- new shares issued on/after 17 March 2016 and held for > 3 years
- unquoted trading company
- investor has not worked for the company
How does incorporation relief work?
Transfer all assets (except cash) of a business as a going concern to a limited company in return for at least some shares
How much is the incorporation relief if ONLY share consideration?
All gains are deferred
How much is the incorporation relief if some other consideration (cash/debt)?
Gain deferred = value of share consideration/ value of total consideration x net gain
Gain is deferred and deducted from the base cost of the shares received
