CH20 - Individual Relief

Question 1

PRR Private Residence Relief Computation with Letting Relief

Answer 1

Gain:
Less PRR
===Chargeable Gain
Less: Letting Relief
===Chargeable Gain after relief

Question 2

PRR - Periods of occupation

Answer 2

Exempt:
When occupied
Final 9 months - assuming it was a main place of residence
Up to 3 years of absence any reason
Any period spent living overseas
Up to 4 years of absence due to working elsewhere

Must be preceded and succeeded by a period of occupation, unless work requires living at this place

Question 3

Owning more than one residence

Answer 3

Elect one for main - elect within two years

Question 4

PRR - Calculation

Answer 4

Gin less:
: PRRelief (PCG*-Exempt months/total months)

Question 5

Business use

Answer 5

Chargeable Gain - Private use is part of the PRR
e.g. 1/5 rooms is chargeable, 4/5

Question 6

Letting Relief Calculation

Answer 6

Chargeable for the period let out
Lower of:
£40k
Normal PRR without letting relief
Chargeable gain attributable to the letting period

Exempt if the person is taking part in meals etc

Question 7

Chargeable

Answer 7

Period travelling/not living in the property over 36 months
Business use of the property
Period where someone lives with you and doesn’t share meals - Gets letting relief though

Question 8

Cost of Properties

Answer 8

Market Value
Less: Cost, Capital expenditure

Question 9

Business asset relief when disposing of business (BADR)

Answer 9

The chargeable gain or assets of a sole trader/partnership business are only taxable at 10%
Shares in a personal trading company if of 5% shares/voting rights and work full or part time also included

Question 10

BADR Limit

Answer 10

Lifetime of £1m
Any previous claims come off of this

Question 11

Non qualifying disposals

Answer 11

Shares in investment company, holiday lettings, assets in investments, individual assets of continuing business (warehouse)

Question 12

Time Limits

Answer 12

Must own for 2 years prior to disposal. Claim for 23/24 by 31 Jan 26

Question 13

Operation of relief

Answer 13

First £1m 10%
Apply Basic rate band relief against BADR - If BADR exceeds basic band, not 10% basic rate relief
Apply AEA after to BADR if possible

Question 14

Proforma for BADR

Answer 14

Two columns

Question 15

If BADR exceeds basic band

Answer 15

Not allowed to use any unused basic rate 10%, ignore taxable income? Question out with Kaplan?

Question 16

Investor Relief rules

Answer 16

Overall limit of 10% on £10m - lifetime

Unlisted ordinary shares (including AIM shares)
Subscribed on/after 17 March 2016 - Not purchased
Held minimum period 3 years since 6 April 2016
Not an employee of the company

Question 17

Investor Relief

Answer 17

Remember chargeable gain is cost less acquisition

Question 18

Roll over relief

Answer 18

Instead of paying chargeable gain when selling asset, if reinvested, the chargeable gain simply reduces the base cost of the new asset

This is not automatic, claim must be made 4 years later of the later of:
Disposal made date
Replacement asset acquired

Question 19

Roll over relief - Qualifying assets

Answer 19

Goodwill, land and builds, fixed plant and machinery not movable.
Replacement asset must be acquired within one year before, and three years after date of sale of the old asset

Question 20

Roll over relief Proforma when disposing

Answer 20

Sale proceeds
Less (Cost MINUS ROR)
=== Chargeable Gain

Question 21

Partial reinvestment of proceeds

Answer 21

ROR becomes the lower of:
Cost of old asset minus new asset
Chargeable gain originally calculated

Question 22

Base cost of new asset

Answer 22

Cost of new asset
Less:
Sum of: (Chargeable gain minus proceeds not reinvested)
===Total

Ignore if proceeds not reinvested exceed chargeable gain.

Question 23

Non-business use

Answer 23

Same as prior, but the non-business use becomes completely chargeable as a gain and isn’t available for ROR

Question 24

Depreciating assets how to

Answer 24

Gain cannot be rolled over, it becomes deferred and adds to the cost of the chargeable gains of the NEW asset
E.g.
Sale proceeds
Less: Cost
= Capital gain
+ Deferred gain
=== chargeable gains

Question 25

Deferred until

Answer 25

Earliest of:
Disposal of replacement asset
Replacement asset stops being used for the purposes of trade
Ten years from date of acquisition of the replacement asset

Question 26

Only depreciating assets testable

Answer 26

Fixed plant and Machinery
Leasehold property over with 60 years on the lease

Question 27

Gift hold over relief

Answer 27

Donor:
Normal capital gain using MV as proceeds
Gain is not chargrable, deferred against base cost of asset of Donee

Donee: Acquisiton cost = MV at date of gift
Base cost = Acquisition cost less gain deferred

Question 28

Qualifying assets: gift hold over relief

Answer 28

Assets used in the trade of the donor, or donor’s personal company
Unquoted shares and securities of a trading company
Quoted shares or securities of donor’s personal trading company >5% ownership
No minimum holding period like BADR

Question 29

If gifted at undervalue

Answer 29

Donor – calculate gain as before

BALANCING FIGURE – this is the gift relief

Chargeable gain is gift value
Less original cost

Donee = MV less gain held over (balancing figure)

If actual proceeds are less than original cost, the chargeable gain is zero for the donor

Question 30

Gifting but only using 60% for trade purposes

Answer 30

Only 60% can be gifted as relief,
The remainder is chargeable to the donor as a chargeable gain

Question 31

Shares in a personal trading company Gifting

Answer 31

Take the Capital gain*(applicable assets/total assets)

Applicable assets:
Land and buildings, shares held as investments