Chapter 3

Question 1

what does disposal mean

Answer 1

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

Question 2

when is the starting point for calculat9ng teh gain

Answer 2

e disposal proceeds less the acquisition cost

Question 3

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

Answer 3

3 years

Question 4

is there cgt payable on death

Answer 4

no - beneeficaris acquire at market value

Question 5

when can a disposal not at arms length occour

Answer 5

disposal between individual family members - father daughter
. Market value can also be used instead of the actual sale
price in disposals between unconnected parties

Question 6

what is ascerntiable consideration

Answer 6

– the amount to be received is fixed

Question 7

what is unascertainable

Answer 7

amount not fixed consideration

Question 8

what is teh relatinshipp between CGT and IHT

Answer 8

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

Question 9

how to determine whetehr the CGT is liable

Answer 9

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

Question 10

what is the annual cgt amount

Answer 10

3,000

Question 11

whta is the chattel amount

Answer 11

anything belwo 6,000 is okay

Question 12

what if it is over

Answer 12

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

Question 13

with absences how do you calculate this

Answer 13

Total gain × period of occupation/
total period of ownership

Question 14

what is exmept from cgt

Answer 14

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

Question 15

what is letting relief

Answer 15

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

Question 16

how do you cslculate cgt

Answer 16

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

Question 17

deductable costs

Answer 17

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 -

Question 18

what is teh acquistion based cost

Answer 18

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

Question 19

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

Answer 19

yes

Question 20

can losses be carried forward numerous years

Answer 20

yes - until ot is absorved -0 but must be claimed wuth 4 years at the end of the tax year

Question 21

when can losses not be decuted

Answer 21

if it arises from arrangements
of which the main purpose, or one of the main purposes,
is to obtain a tax advantage.

Question 22

what is a part disposal

Answer 22

where part of teh aset is sold

Question 23

what is teh fomrula for part disposal

Answer 23

a/ a+b x originbak cost

a - proceeds of part disposed
b- market value

Question 24

what is business asset relief

Answer 24

ss asset disposal relief can be claimed when an
individual disposes of a business or a part of a business.

Question 25

what is the business relief and what doe sit cover

Answer 25

covers teh first 1 million of qualifying gains

Question 26

how are the business asste dispoal relief taxed

Answer 26

at a reduced rate of 10%

Question 27

what if the on emillion pounds is exceeded

Answer 27

then it it is taxed normally as CGT

Question 28

what is the rate of siposal of shares regaring hold over relief

Answer 28

5%

Question 29

what is invetsors relief

Answer 29

extends business asset disposal relief to
long-term external investors in unlisted trading companies.

Question 30

what rate of tax is given for investors relief

Answer 30

10%

Question 31

what is the limit to invetsors limit

Answer 31

10 million

Question 32

how long should the sgares be hold for inestors relied

Answer 32

r a continuous period of three
years, starting on or after 6 April 2016, before relief will
be available

Question 33

what is holdover relief

Answer 33

n hold over the gain on disposals of certain
assets by way of a gift.

Question 35

what qualifies for holdover relief

Answer 35

y are
transfers chargeable to IHT and disposals of trading assets
including certain private company shares.

Question 36

do most trusts qualify for holdovcer relief

Answer 36

yes

Question 37

if holdover reliefg is claimed what happens

Answer 37

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

Question 38

who is th eholdover relif given to

Answer 38

f donor and donee jointly claim

Question 39

who is reliegf given to

Answer 39

o persons resident in the
UK. If the donee ceases to be UK resident within six years

Question 40

is holdover relief given to r transfers of shares to a company

Answer 40

no

Question 41

what is a trading asset

Answer 41

an asset used in the trade of the donor or by the donor’s
personal company - holdover relief can be granted

Question 42

what is businenss rollover relief

Answer 42

s, both companies and unincorporated, can claim
business rollover relief if they sell assets used in the business

Question 43

what conditions must be met for business rollover relief

Answer 43

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

Question 44

what is rollover relief on incoporation of a business

Answer 44

unincorporated business is transferred to a limited company
in exchange for new shares in that company

Question 45

when is reinvetsment relief given

Answer 45

CGT arising on the disposal of any type of asset can be
deferred through a subscription for EIS shares

Question 46

what is the trust annual exmeption on cgt

Answer 46

1,500

Question 47

with a bare trusrt who is liable for cgt

Answer 47

the beneifucary

Question 48

with trusts for vulerable beneeifcaries what special treatment is given

Answer 48

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

Question 49

in terms of rate whta would vulerable beneeicaries recieve

Answer 49

e beneficiary’s basic rate will be taxed at 10% or
18% rather than the higher rates

Question 50

what happens when a disposal is mae by the trustees

Answer 50

are chargeable in accordance with the usual rules and
taxable at the rate of 20%

Question 51

with discretionary trusts what happens wne the settetlor transfers chargable assets to a discretioanry trust

Answer 51

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

Question 52

what is private residenxe relief

Answer 52

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

Question 53

what is the cgt on trsust where settlor retains interest

Answer 53

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%