Chapter 3 Flashcards
what does disposal mean
any transfer of ownership or the derivation of a
capital sum from the asset. It covers sales and gifts, whether
absolute or by way of trust, and exchanges of property
when is the starting point for calculat9ng teh gain
e disposal proceeds less the acquisition cost
hiow long do seprrating couples have to make a no gain no loss transfer
3 years
is there cgt payable on death
no - beneeficaris acquire at market value
when can a disposal not at arms length occour
disposal between individual family members - father daughter
. Market value can also be used instead of the actual sale
price in disposals between unconnected parties
what is ascerntiable consideration
– the amount to be received is fixed
what is unascertainable
amount not fixed consideration
what is teh relatinshipp between CGT and IHT
if the value is taken at iht - this will be the vakue at cgt
how to determine whetehr the CGT is liable
subject matter - period of wonership
frequency of simalr transactions - quantity purchased - work carried out - citcumestances (a forced sale is not trading)
motive
organisation
financinf
method of acquistion
what is the annual cgt amount
3,000
whta is the chattel amount
anything belwo 6,000 is okay
what if it is over
if the disposal exceeds 6,000 - the chargable gain cannot exceed five thirds of the excess over 6,000
with absences how do you calculate this
Total gain × period of occupation/
total period of ownership
what is exmept from cgt
private residence, absences (not occupying the house), letting relief
what is letting relief
letting relief
available when part of a property is let as residential
accommodation and the other part is the owner’s main
residence - got to ve in shared occupancy
how do you cslculate cgt
Determine the disposal proceeds (actual sale price or
market value).
2. Deduct the acquisition cost.
3. Deduct any costs incurred in arranging the purchase and
sale and any enhancement costs.
4. Set off any allowable capital losses, allocating them
against gains in the way that minimises the tax due,
namely by setting them against gains taxable at the
highest rate first.
5. Deduct the annual exempt amount in the way that
minimises the tax due.
6. Calculate the tax at the appropriate rate
deductable costs
acquistion based costs,e stockbrokers’ fees, legal costs,
estate agents’ fees, stamp duty, stamp duty reserve
tax (SDRT) and stamp duty land tax (SDLT. enhacnig value of property.cost of building an extension to a house -
what is teh acquistion based cost
If the asset was bought on a commercial basis, the
acquisition cost is the purchase price.
can losses ve set against any gains in the sm etax year
yes
can losses be carried forward numerous years
yes - until ot is absorved -0 but must be claimed wuth 4 years at the end of the tax year
when can losses not be decuted
if it arises from arrangements
of which the main purpose, or one of the main purposes,
is to obtain a tax advantage.
what is a part disposal
where part of teh aset is sold
what is teh fomrula for part disposal
a/ a+b x originbak cost
a - proceeds of part disposed
b- market value
what is business asset relief
ss asset disposal relief can be claimed when an
individual disposes of a business or a part of a business.
what is the business relief and what doe sit cover
covers teh first 1 million of qualifying gains
how are the business asste dispoal relief taxed
at a reduced rate of 10%
what if the on emillion pounds is exceeded
then it it is taxed normally as CGT
what is the rate of siposal of shares regaring hold over relief
5%
what is invetsors relief
extends business asset disposal relief to
long-term external investors in unlisted trading companies.
what rate of tax is given for investors relief
10%
what is the limit to invetsors limit
10 million
how long should the sgares be hold for inestors relied
r a continuous period of three
years, starting on or after 6 April 2016, before relief will
be available
what is holdover relief
n hold over the gain on disposals of certain
assets by way of a gift.
what qualifies for holdover relief
y are
transfers chargeable to IHT and disposals of trading assets
including certain private company shares.
do most trusts qualify for holdovcer relief
yes
if holdover reliefg is claimed what happens
no CGT is payable at the time
of the gift, but the acquisition cost to the donee is reduced
by the amount of the held-over gain
who is th eholdover relif given to
f donor and donee jointly claim
who is reliegf given to
o persons resident in the
UK. If the donee ceases to be UK resident within six years
is holdover relief given to r transfers of shares to a company
no
what is a trading asset
an asset used in the trade of the donor or by the donor’s
personal company - holdover relief can be granted
what is businenss rollover relief
s, both companies and unincorporated, can claim
business rollover relief if they sell assets used in the business
what conditions must be met for business rollover relief
business must be trading
assets sold must have been used for trading purposes
sale must be reinvested
new assets myst be bought - t in a period starting one
year before and ending three years after the disposal of
the old assets
what is rollover relief on incoporation of a business
unincorporated business is transferred to a limited company
in exchange for new shares in that company
when is reinvetsment relief given
CGT arising on the disposal of any type of asset can be
deferred through a subscription for EIS shares
what is the trust annual exmeption on cgt
1,500
with a bare trusrt who is liable for cgt
the beneifucary
with trusts for vulerable beneeifcaries what special treatment is given
t the trustees can claim a reduction in their
CGT liability based on the difference between the CGT that
the beneficiary would have paid and the CGT
in terms of rate whta would vulerable beneeicaries recieve
e beneficiary’s basic rate will be taxed at 10% or
18% rather than the higher rates
what happens when a disposal is mae by the trustees
are chargeable in accordance with the usual rules and
taxable at the rate of 20%
with discretionary trusts what happens wne the settetlor transfers chargable assets to a discretioanry trust
any capital gain can be held over, provided the
trust is not a settlor-interested trust. These trusts are taxed
under the relevant property trust t
what is private residenxe relief
trustee allows a beneificary to occupy property belonging to trust - the trustees be able to claim = the PRR exemption (also known as
‘main residence exemption’) from CGT on a later sale of the
property
what is the cgt on trsust where settlor retains interest
20%, unless the asset in question is residential property
that is not the main residence of a beneficiary, in which case
the rate is 24%
