Chapter 12 - Capital Gains Tax Reliefs Flashcards
What qualifies for gift releif?
Chargeable assets used in a business.
Shares in a trading co. (Min. 5% holding if quoted).
What are the 5 types of deemed occupation?
1) Last 9 months of ownership.
2) Max 24 months of absence whilst prevented from living there.
Last 3 must have occupation BEFORE & AFTER:
3) Max 3 years for any reason.
4) Max 4 years whilst working elsewhere.
5) Any period while working overseas.
What is PPR relief?
reduces chargeable gain on the sale of an individual’s PPR.
PPR Relief = gain on disposal x (actual + deemed occupation) / total ownership
What are the 5 types of deemed occupation?
1) Last 9 months of ownership
2) Up to 24 Ms of absence whilst prevented from living there.
Following must have actual occupation BEFORE & AFTER these events:
3) Up to 3 years absence for any reason
4) Any period where working overseas
5) Up to 5 years when working elsewhere
How does business use effect the deemed occupation?
Can’t use deemed occupation rules on periods where:
- Partly occupied
- Partly business use or let out
So find non-bus proportion and apply rules to that amount
EXCEPTION is last 9 months rule which can be used even if home was fully occupied before disposal
What is roll-over relief and how does it work?
Old and new asset used in trade, where reinvestment occurs 12Ms before and 35Ms after disposal.
Qualifying assets are Land and Buildings and Goodwill.
But depreciating assets only get holdover relief.
How much relief is rollover relief?
If all proceeds reinvested - 100% relief
If some proceeds retained - chargeable gain is lower of:
- Amount not reinvested
- Gain on disposal
How is relief given for rollover relief?
Reinvestment in non-depreciating asset:
- deduct deferred gain from the base of the cost of the replacement asset.
Reinvestment in depreciating asset:
- Gain is frozen and becomes chargeable on earliest of
1) 10 years from date of purchase of replacement asset
2) Date replacement asset ceases to be used in trade
3)Disposal of new Asset
How does non-business use effect rollover relif?
If original asset not 100% bus use:
- apportion gain between bus and non-bus - bus part qualifies for RoR.
If replacement asset not 100% bus use:
- Split replacement cost between bus and non-bus, as only bus part qualifies as reinvestment for RoR.
What is gift relief and how does it work?
Gift of a chargeable business asset or shares in a trading company (min 5% if quoted shares) at undervalue.
If no cash received, then all gains deferred. If proceeds, then gain chargeable after gift relief = actual proceeds - allowable cost.
Gift relief is deducted from donee’s base cost
Any consideration in excess of base cost is immediately chargeable.
What is the gift relief restriction on shares in a personal company?
Restricted if company owns non-business assets, e.g. shares in another company.
Gift Relief restriction = gain x CBAs/CAs
CBAs = chargeable business assets - CAs used in business.
CAs = chargeable assets - asset that if sold is subject to CGT.
What is BADR?
Reduced rate of CGT @ 10% (irrespective of income levels)
Can offset capital losses and AEA against non-qualifying assets first
Qualifying assets treated as using remaining BRB first in priority to non-qualifying assets.
Lifetime limit = £1m
What qualifies for BADR?
Ownership period of minimum 2 years
Whole/substantial part of unincorporated business
Shares sold in trading company where you are an employee and own minimum 5%
