Chapter 3 Flashcards by James Ellis

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

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when is the starting point for calculat9ng teh gain

e disposal proceeds less the acquisition cost

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hiow long do seprrating couples have to make a no gain no loss transfer

3 years

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is there cgt payable on death

no - beneeficaris acquire at market value

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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

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what is ascerntiable consideration

– the amount to be received is fixed

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what is unascertainable

amount not fixed consideration

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what is teh relatinshipp between CGT and IHT

if the value is taken at iht - this will be the vakue at cgt

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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

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what is the annual cgt amount

3,000

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whta is the chattel amount

anything belwo 6,000 is okay

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what if it is over

if the disposal exceeds 6,000 - the chargable gain cannot exceed five thirds of the excess over 6,000

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with absences how do you calculate this

Total gain × period of occupation/
total period of ownership

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what is exmept from cgt

private residence, absences (not occupying the house), letting relief

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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

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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

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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 -

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what is teh acquistion based cost

If the asset was bought on a commercial basis, the
acquisition cost is the purchase price.

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can losses ve set against any gains in the sm etax year

yes

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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

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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.

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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

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

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%