Ch15: Business Reliefs Flashcards

(1) BADR (2) Investor's Relief (3) Gift Holdover Relief (4) Replacement of Business Assets (Rollover Relief)

1
Q

What are the conditions for BADR?

A

F - 5% Shareholding

T - Trading Company

T - 2 Year Ownership Before Disposal

W - Work there as an EE or ER

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2
Q

How much relief do you get in regards to BADR?

A

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.

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3
Q

Gains qualifying for BADR are taxed at what rate?

A

10%

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4
Q

What is the process for calculating gains that DO NOT qualify for BADR?

A

(1) Deduct losses
(2) Deduct AEA
(3) Tax - Residential Property Gains (18% or 28%) or Other Gains (10% or 20%)

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5
Q

When is the deadline for individuals to claim BADR?

A

First anniversary of 31 January following the end of the TY from disposal (e.g. 2023/24 disposal = claim by 31 January 2026).

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6
Q

Investors Relief is available on the disposal of shares in an UNLISTED TRADING COMPANY.
What are some of its conditions?

A
  • 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.
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7
Q

For investors relief, shares must be
(a) Held for a minimum of how many years?
(b) Issued by?

A
  • Held for a minimum of 3 years.
  • Issued on or after 17 March 2016.
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8
Q

Gift Holdover Relief -
What is the formula to calculate Gifts of Qualifying Shares?

A

Total Gains * (MV of Chargeable Business Assets / MV Of Chargeable Assets)

CBA = Chargeable Assets, except investments.
CA = Assets not exempt from CGT.

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9
Q

What are some conditions that need to be met for Rollover Relief?

A
  • 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.
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10
Q

Claim for the Rollover Relief must be made by the LATER of:

A

(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.

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11
Q

Rollover Relief - Conditions of a depreciating asset?

A
  • Asset will becoming a WASTING ASSET within the next 10 years.
  • Expected life of 60 years or less.
  • Fixed plant and machinery.
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12
Q

If the new asset is a depreciating asset, would you deduct or not deduct the gain deferred from the cost of the news asset?

A

Gain deferred is NOT DEDUCTED from the cost of the new asset.

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13
Q

If the gain deferred is NOT DEDUCTED from the cost of the new asset, then what happens?

A

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.

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14
Q

Proforma for calculating Investor’s Relief.

A

Proceeds
LESS Costs
EQUALS Chargeable Gains
LESS AEA
EQUALS Taxable Gains
CGT @ 10%

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15
Q

Proforma for calculating Gift Holdover Relief.

A

Proceeds (MV)
LESS Costs
EQUALS Gain
LESS Deferred Gain (BALANCE)
Chargeable Gain [Actual Proceeds - Actual Costs]

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16
Q

Proforma for Gain Arising and Base Costs for Gift Holdover Relief.

A
  • DISPOSAL: *
    Deemed Proceeds (MV)
    LESS Costs
    EQUALS Gain
    LESS Gift Relief [ Total Gains * (MV of Chargeable Business Assets / MV Of Chargeable Assets) ]
    EQUALS Chargeable Gains
  • BASE COSTS: *
    Proceeds (MV)
    LESS Gift Relief
    EQUALS Base Costs
17
Q

Proforma for Rollover Relief.

A

Sale Proceeds
LESS Costs
EQUALS Gain
LESS Rollover Relief (BALANCE)
EQUALS Chargeable Gains: Amount NOT Reinvested [Sale Proceeds - Amount Reinvested]

Cost of Reinvestment
LESS Rollover Relief
EQUALS Base Cost C/F