Ch15: Business Reliefs Flashcards
(1) BADR (2) Investor's Relief (3) Gift Holdover Relief (4) Replacement of Business Assets (Rollover Relief)
What are the conditions for BADR?
F - 5% Shareholding
T - Trading Company
T - 2 Year Ownership Before Disposal
W - Work there as an EE or ER
How much relief do you get in regards to BADR?
Covers the first £1 million of chargeable gains on:
(1) The whole or part of the business.
(2) Disposal of shares in a TRADING COMPANY, where an individual has at least 5% SHAREHOLDING and is also an EE of the company.
Gains qualifying for BADR are taxed at what rate?
10%
What is the process for calculating gains that DO NOT qualify for BADR?
(1) Deduct losses
(2) Deduct AEA
(3) Tax - Residential Property Gains (18% or 28%) or Other Gains (10% or 20%)
When is the deadline for individuals to claim BADR?
First anniversary of 31 January following the end of the TY from disposal (e.g. 2023/24 disposal = claim by 31 January 2026).
Investors Relief is available on the disposal of shares in an UNLISTED TRADING COMPANY.
What are some of its conditions?
- Taxed at 10%.
- Shares issued directly by the taxpayer ON OR AFTER 17 MARCH 2016 and held for a minimum of 3 years.
- Do not need to have a minimum shareholding and do not need to be an EE.
- £10 million allowance.
- Claim by first anniversary of 31 January following the end of the TY of disposal.
For investors relief, shares must be
(a) Held for a minimum of how many years?
(b) Issued by?
- Held for a minimum of 3 years.
- Issued on or after 17 March 2016.
Gift Holdover Relief -
What is the formula to calculate Gifts of Qualifying Shares?
Total Gains * (MV of Chargeable Business Assets / MV Of Chargeable Assets)
CBA = Chargeable Assets, except investments.
CA = Assets not exempt from CGT.
What are some conditions that need to be met for Rollover Relief?
- Both old and new asset must be used in trade by the same person who is claiming rollover relief.
- Part use is treated as two separate assets (i.e. half a building is used for trade and the other isn’t = 2 assets).
- Both the old and new assets fall within the following asset classes:
1. Land and Building
2. Fixed Plant and Machinery.
3. Goodwill. - Reinvestments must be made by either:
(1) 1 year BEFORE sale (2) 3 years AFTER sale.
Claim for the Rollover Relief must be made by the LATER of:
(1) 4 years of the end of the TY of disposal of the OLD ASSET takes place.
(2) 4 years of the end of the TY of disposal of the NEW ASSET is acquired.
Rollover Relief - Conditions of a depreciating asset?
- Asset will becoming a WASTING ASSET within the next 10 years.
- Expected life of 60 years or less.
- Fixed plant and machinery.
If the new asset is a depreciating asset, would you deduct or not deduct the gain deferred from the cost of the news asset?
Gain deferred is NOT DEDUCTED from the cost of the new asset.
If the gain deferred is NOT DEDUCTED from the cost of the new asset, then what happens?
Postponed till the EARLIEST of:
(1) Disposal of new assets.
(2) Date new asset ceases to be used in trade.
(3) 10 years after the acquisition of the new asset.
Proforma for calculating Investor’s Relief.
Proceeds
LESS Costs
EQUALS Chargeable Gains
LESS AEA
EQUALS Taxable Gains
CGT @ 10%
Proforma for calculating Gift Holdover Relief.
Proceeds (MV)
LESS Costs
EQUALS Gain
LESS Deferred Gain (BALANCE)
Chargeable Gain [Actual Proceeds - Actual Costs]