Ch13: Computing Chargeable Gains Flashcards
(1) Chargeable Persons, Disposals and Assets (2) Exempt Disposals (3) Enhancement Expenditure (4) CGT Payable by Individuals (5) Date Payable & CGT Planning (6) YE Computations / Capital Losses (7) Part Disposals (8) Transfers between Spouses / Civil Partners (9) Compensation or Insurance Money
For a chargeable gain to arise, there must be:
(1) A Chargeable Person.
INDIVIDUALS = resident in the UK, pay CGT on net chargeable gains.
COMPANIES = Pay CT on net chargeable gains.
For a chargeable gain to arise, there must be:
(2) Chargeable Assets
All assets, unless they are exempt.
For a chargeable gain to arise, there must be:
(3) Chargeable Disposal
- Sale of assets or part of assets.
- Gift of assets or part of assets.
- Loss or destruction of assets.
What are some Allowable Expenditures (ADD BACK) when computing chargeable gains?
- Transfer of Assets on Death.
- Gifts to Charities.
True or False -
Cars are exempt from CGT
False - only private use cars are exempt.
Are the following exempt from CGT?
- Gilt-Edged Securities
- QCBs
- Premium Bonds
All exempt.
Would you add ‘NS&I Certificates’ to the CGT computation?
No, it is exempt.
Include ‘Cost of Repairs and Maintenance’ in the CGT computation under Enhancement Expenditure?
No, it will be excluded.
= Deductible = Allowance = Do not add back
Allowable Expenditure?
- Cost of Acquisition
Yes
= Deductible = Allowable = Do Not Add Back
Exclude ‘Cost of Insurance’ and ‘ Any expenditures that are deductible from trading profits’ in the CGT computation under Enhancement Expenditure?
Yes, they are excluded.
= Deductible = Allowable = Do not add back
Include ‘Any expenditures met by public funds (e.g. Council Grants)’ in the CGT computation under Enhancement Expenditure?
No, it will be excluded.
Allowable Expenditure?
- Enhancement Expenditure
Yes
Do not add back (= Deductible)
Enhancement Expenditure is Capital Expenditure
Disallowable Expenditure?
Incidental Costs during Acquisition
No, it is an allowable expense.
Allowable = Deductible = Do NOT Add Back
Allowable or Disallowable - Expenditure Incurred to establish, preserve or defend assets.
Allowable.
What is the cost of acquisition when an individual ACQUIRES assets as a GIFT?
MV at the Date of Gift.
What is the cost of acquisition when the individual INHERITS an asset on DEATH?
MV at the Date of Death.
What is the Annual Exemption Amount when computing Chargeable Gains?
(i.e. Residential Gains / Other Gains)
AEA = £6,000.
What are the rates of Tax for CGT?
BRB = 10%
HRB = 20%
Residential Property -
BRB = 18%
HRB = 28%
What is the date payable for Residential Properties?
POA must be made to HMRC within 60 days of the disposal.
(E.g. Disposal on 31 July = POA by 29 September).
What is the date payable for Other Gains?
31 January AFTER the end of the TY of disposal.
(E.g. Disposal in 23/24 = 31 January 2025).
How is the ‘Use of AEA’ considered during CGT Planning?
A gain has already used the AEA in the TY, it may be advisable to delay making another gain until the next TY.
How is the ‘Rate of Tax in relation to the individuals taxable income’ considered during CGT Planning?
Gains should be made on the TY in which the individual has the lowest amount of taxable income, particularly where they have part of the BRB unused.
How is the ‘Timing of the Payment to CGT’ considered during CGT Planning?
May be better to make a gain early in a TY as this will give the longest gap between receiving proceeds and paying tax.
Computation method for CY Losses.
Step 1: Offset CY Losses.
Step 2: Deduct AEA.
Computation method for Losses B/F.
Step 1: Deduct AEA.
Step 2: Offset CY Losses.
What is the proforma for calculating Part Disposals?
Proceeds of Part Disposal (A)
LESS Selling Costs (X)
EQUALS Gain
LESS [ Original Cost of Whole Asset * (A / A + B) ] (Z)
EQUALS Chargeable Gain (X)
A = MV of the Part Disposed
B = MV of the remainder of Asset (GIVEN)
What is the formula to calculate Compensation or Insurance Money?
[ A / A + B ]
where:
A = Compensation Received
B = Unrestored Value of Asset
What happens when an asset is completely destroyed?
Full disposal and compensation is wholly charged to CGT.
