CH20 - Individual Relief Flashcards
PRR Private Residence Relief Computation with Letting Relief
Gain:
Less PRR
===Chargeable Gain
Less: Letting Relief
===Chargeable Gain after relief
PRR - Periods of occupation
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
Owning more than one residence
Elect one for main - elect within two years
PRR - Calculation
Gin less:
: PRRelief (PCG*-Exempt months/total months)
Business use
Chargeable Gain - Private use is part of the PRR
e.g. 1/5 rooms is chargeable, 4/5
Letting Relief Calculation
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
Chargeable
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
Cost of Properties
Market Value
Less: Cost, Capital expenditure
Business asset relief when disposing of business (BADR)
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
BADR Limit
Lifetime of £1m
Any previous claims come off of this
Non qualifying disposals
Shares in investment company, holiday lettings, assets in investments, individual assets of continuing business (warehouse)
Time Limits
Must own for 2 years prior to disposal. Claim for 23/24 by 31 Jan 26
Operation of relief
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
Proforma for BADR
Two columns
If BADR exceeds basic band
Not allowed to use any unused basic rate 10%, ignore taxable income? Question out with Kaplan?
Investor Relief rules
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
Investor Relief
Remember chargeable gain is cost less acquisition
Roll over relief
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
Roll over relief - Qualifying assets
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
Roll over relief Proforma when disposing
Sale proceeds
Less (Cost MINUS ROR)
=== Chargeable Gain
Partial reinvestment of proceeds
ROR becomes the lower of:
Cost of old asset minus new asset
Chargeable gain originally calculated
Base cost of new asset
Cost of new asset
Less:
Sum of: (Chargeable gain minus proceeds not reinvested)
===Total
Ignore if proceeds not reinvested exceed chargeable gain.
Non-business use
Same as prior, but the non-business use becomes completely chargeable as a gain and isn’t available for ROR
Depreciating assets how to
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
Deferred until
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
Only depreciating assets testable
Fixed plant and Machinery
Leasehold property over with 60 years on the lease
Gift hold over relief
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
Qualifying assets: gift hold over relief
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
If gifted at undervalue
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
Gifting but only using 60% for trade purposes
Only 60% can be gifted as relief,
The remainder is chargeable to the donor as a chargeable gain
Shares in a personal trading company Gifting
Take the Capital gain*(applicable assets/total assets)
Applicable assets:
Land and buildings, shares held as investments
