CH18 - CGT - Special Rules

Question 1

Transfer between spouses and civil partners

Answer 1

No gain or loss on transfer, proceeds are ignored, deemed to dispose of asset at its acquisition cost
When it’s sold on, acquisition cost is original acquisition cost

Question 2

Reason for transferring between spouses: planning opporrtunities

Answer 2

Transfer to make use of:
Annual exemption amount of CGT AEA
Each other’s basic rate
Capital Losses

Question 3

Part disposal

Answer 3

Sale proceeds of disposal: X (Given)
Less: Allowable cost: OC*D/(D+MV Remainder)
=== Chargeable Gain

Question 4

Selling off the remainder

Answer 4

Sale proceeds
Less: Deemed cost of the remainder
OC MINUS OC*D/(D+MV) - as above
=== Chargeable gain

Question 5

If incidental costs are across the whole asset not the amount disposed of

Answer 5

Use the same calculation OC*D/(D+MV), but OC becomes the cost of incremental cost in question e.g. legal fees

Legal fees minus Legal fees *D/(D+MV)

Question 6

Chattels - Wasting chattels (inc P&M)

Answer 6

Always exempt e.g. animals, boats (less than 50 year life)
P&M = chargeable gain, or loss will offset by capital allowances

Question 7

Non-wasting chattels (paintings, art etc) bought and sold under £6k

Answer 7

Exempt

Question 8

Non-wasting chattels (paintings, art etc) bought for less than £6k and sold for more

Answer 8

Limited to (5/3)*(Disposal proceeds-6000 limit)

Question 9

Non-wasting chattels (paintings, art etc) bought for more than £6k but sold for less

Answer 9

Allowable Loss. Gross proceeds are always at least £6k

Question 10

Non-wasting chattels (paintings, art etc) bought and sold for more than £6k

Answer 10

Normal CGT

Question 11

Asset lost or stolen

Answer 11

No insurance proceeds = CGT LOSS always
Insurance proceeds not reinvested = insurance are the proceeds less cost

Question 12

Asset lost or stolen, insurance (replaced within 12 months)

Answer 12

Proceeds less:
Replacement cost less (Compensation + deemed disposal proceeds)
= Chargeable gain

Question 13

Asset lost or stolen, insurance (Partially reinvested within 12 months)

Answer 13

Insurance proceeds less cost
Gain deferred (BALANCING Figure)
= Chargeable gain = Proceeds minus replacement)

Base Cost is reduced by the deferred gain.

Question 14

Asset damaged - proceeds not used in restoration work

Answer 14

Proceeds
LESS:
OC*D/(D+MV)
=Chargeable gain

Question 15

Asset damaged - proceeds used in restoration

Answer 15

Rebaseline the cost

Original cost plus restoration cost less insurance proceeds

Question 16

Part disposal value of remaining portion

Answer 16

Original cost less chargeable gain on the disposed portion
Disposed portion is done via proceeds - deemed cost (OC*D/(D+MV)

Question 17

Rollover relief - proceeds fully reinvested (new factory cost more than old) - base cost

Answer 17

Chargeable gain from the old factory simply reduces the base cost of the new factory

Question 17

Rollover relief - proceeds fully reinvested (new factory costs less than the disposal proceeds of old factory)

Answer 17

That amount it’s less is chargeable immediately
E.g. I sell for 500k, make gain of 100k and buy for 480k. 20k immediately chargeable. New factor for 480k’s base cost is only 400k

If chargeable gain is less than the difference, there’s no change to base cost of new asset