Chapter 19 - Computation of gains and tax payable

Question 1

For capital gains to occur what are the three things we need?

Answer 1

• Chargeable person
• Chargeable disposal
• Chargeable asset

Question 2

Who is a chargeable person?

Answer 2

• UK resident individuals

- UK resident companies

Question 3

What is a chargeable disposal?

Answer 3

• Sale
• Gift/exchange
• Loss or damage/Insurance proceeds

Whole or part disposal

Question 4

When is a disposal not chargeable?

Answer 4

• Disposal on death

- Gift to charities

Question 5

What is a chargeable asset? (Five things)

Answer 5

• Land
• Buildings
• Goodwill
• Shares
• Chattels (special rules)

Question 6

What are the 8 exempt assets under capital gains tax?

Answer 6

• Motor vehichles
• Main residence
• Cash
• ISA’s
• Corporate bonds/guilt edged securities/debentures
• NS certificates
• Wasting chattels
• Non-wasting chattels (cost and sale proceeds < £6,000)

Question 7

State the chargeable gain proforma

Answer 7

Disposal proceeds / market value X
Less: Allowable expenditure (X)

Net disposal proceeds X
Less: Allowable expenditure
 Cost of acquisition (X)
 Incidental costs of acquisition (X)
 Additional (capital) enhancement expenditure (X)

Chargeable gain/(allowable loss) X/(X)

Question 8

When a disposal occurs between connected persons, what will be used.

Answer 8

Market value

Question 9

Who can be a connected person?

Answer 9

• Parents/grandparents
• Siblings
• Children/grand children

Question 10

What are the ways you can you deduct the cost of an asset which you dispose of?

Answer 10

1) Cost of purchase
2) Gifted - MV at date of gift
3) Death - probate - MV at death

Question 11

A loss incurred through a connected person can only be relieved against gains arising from…

Answer 11

The same connected person