Chapter 22 - CGT Reliefs

Question 1

Circumstances by which a part disposal may be avoided: 3

Answer 1

1. all of the money received is applied to restoring the asset
2. the asset is not a wasting asset and all the money received is applied to restoring the asset except for an amount which is small in comparison with the amount received and which is not reasonably required for restoration purposes.
3. the asset is not a wasting asset and the amount of money received is small in comparison with the value of the asset.

Question 2

What is regarded as “small”?

Answer 2

Sum does not exceed £3000 or 5% of the amount with which it is being compared, whichever is higher.

Question 3

Main effects of roll-over relief

Answer 3

1. The disposal of the old asset is deemed to give rise to neither a gain or a loss.
2. The cost of the new asset for CGT purposes is reduced by the gain which would have been chargeable on the disposal of the old asset if the claim for roll-over relief had not been made

Question 4

Asset types required for roll-over relief: 5

Answer 4

1. land, buildings and fixed plant and machinery
2. goodwill
3. ships,aircraft, hovercraft, satellites, space stations and spacecraft
4. milk, potato, and fish quotas and certain EU agricultural quotas.
5. Lloyd’s syndicate rights

Question 5

Conditions for roll-over relief: 4

Answer 5

1. Must be the right asset type
2. old asset must have been used only for trade for the period of ownership and new asset must be taken into trading immediately. No requirement asset to be used in same trade.
3. new asset must be acquired in the period beginner one year prior and ending three years after the date of disposal of the old asset.
4. taxpayer must make claim within four years of the end of the later of the tax year in which the old asset is disposed of and the tax year in which the new asset is acquired

Question 6

What is a depreciating asset?

Answer 6

a wasting asset or an asset which will become a wasting asset within 10 years of the date of acquisition

Question 7

Rules on replacement with a depreciating asset

Answer 7

the gain arising on the disposal of the old asset cannot be rolled-over and is not deducted from the cost of the new asset. Instead the gain is temporarily deferred or held-over until it crystallises on the earliest of the following:

1. the date on which the new asset is disposed of
   b. the date on which the new asset ceases to be used for trade purposes
   c. the 10th anniversary of the acquisition of the new asset

Question 8

If a suitable non-depreciating asset is acquired before the earliest of the above dates what happens?

Answer 8

the held-over gain may be transferred to this new asset, so converting a temporarily held over gain into a permanently rolled-over gain.