Chapter 8 Introduction to Capital Gains Tax Flashcards
CGT
A chargeable person can be an individual or a company, however if a company makes a chargeable gain it does not pay CGT, instead it pays corporation tax. If an individual is resident in the UK, they are chargeable to CGT on worldwide assets. Non-UK residents are only subject to CGT on the disposal of UK residential and commercial property.
Disposals - A gift of an asset counts as a disposal as well as selling an asset. Death is not an occasion of charge for CGT purposes. The person who is left the assets by the deceased will inherit the assets with a base cost equal to market value at the date of death (probate value).
Exempt assets – cars are always exempt from CGT; however, vans and lorries are not exempt. Wasting chattels (tangible, moveable property with a useful life of less than 50 years, gilts (treasury issued stock issued by the UK gov, shares in an ISA, shares in VCTs, EIS and SEIS companies are all exempt.
Transfers – any transfer between a spouse is treated as taking place at no gain no loss.
Charities – gains on gifts of assets or sales of assets at an undervalue to charities are also treated as taking place at no gain and no loss.
AEA – each individual has an annual exempt amount for capital gains tax, this is £12,300 for 20/21.
Calculation of CGT – the rate of CGT depends on the level of an individual’s taxable income and the nature of the asset being disposed of. If an individual pays tax at the higher rate or above, they pay CGT at 20%. The unused basic rate band is taxed at 10%.
A gain for residential property arises at 18% and 28% depending on the unused basic rate band. The annual exempt can be allocated in the most beneficial way.
Due Date – CGT is fully payable in full on 31 January following the year in which the gain was made. However, where a non-UK resident makes a disposal of UK land on or after 6 April 2019, a payment on account of the tax due must be made within 30 days of the day following completion.
