Chapter 11 - Chargeable Gains for Individuals

Question 1

What price does disposals with connected persons occur at?

Answer 1

At market value (irrelevant of actual proceeds received)

Losses on disposals to connected persons can only be offset against gains with that same connected person.

Question 2

How to calculate the value of quoted shares for capital gains tax purposes?

Answer 2

Lower quoted price + 1/2(Higher quoted price - lower quoted price).

Question 3

How do you deal with P&M used in a business that are sold at a profit/loss?

Answer 3

Sold at a loss - no allowable loss (as CAs already given)

Sold at a profit - use non-wasting chatting rules, so exempt if bought/sold less than £6,000.

Question 4

What is the formula for part disposal of an asset?

Answer 4

Original cost of the asset needs to be apportioned to determine the allowable cost for the gains computation.
Allowable cost = Cost x A/(A+B)
A = MV of part disposed of (gross proceeds on disposal)
B = MV of part retained

Question 5

What is the annual exempt amount?

Answer 5

£12,300
Deducted from chargeable gains to produce taxable gains.
Cannot be c/f if unused

Question 6

How do you address current year capital losses?

Answer 6

Auto-offset against current year chargeable gains, even if means wasting AEA.
Excess capital losses b/f to offset against future capital gains.
Capital losses b/f are used after the AEA so doesn’t waste any AEA.

Question 7

What are the rates of capital gains tax for residential property?

Answer 7

18%/28%

Question 8

What order should you apply CY capital losses, AEA and b/f capital losses?

Answer 8

1) Vs residential property
2) Vs normal gains
3) Gains qualifying for BADR

Question 9

How to deal with easting chattels and examples?

Answer 9

Predictable life at date of disposal is 50 years or less.
Exempt from CGT.
Computers, TVs, animals, caravans

Question 10

What price does disposals with spouses occur

Answer 10

If living together, occur at a no gain no loss basis.

Deemed acquisition cost of the acquiring spouse is equal to the deemed disposal proceeds for the disposing spouse.

Question 11

Who counts as a connect party?

Answer 11

Spouse
Direct relatives (bros, sisters, direct ancestors and descendants) and their spouses
Business partners and their spouses
Companies they control

Question 12

Disposals of shares/securities BY INDIVIDUALS?

Answer 12

Share matching rules in following order:

1) Acquisitions on same day as disposal
2) Acquisitions within following 30 days
3) Share pool

Question 13

How to deal with bonus/rights issues in the share pool?

Answer 13

Bonus - free shares so go in at zero cost.

Rights - like a normal share issue