Chapter 8 - Introduction to CGT

Question 1

Definition

Answer 1

A capital gain is made where a chargeable person disposes of a capital asset for a profit

Question 2

Chargeable Person

Answer 2

Can be a person or a company. REMEMBER companies don’t pay CGT, they pay corp tax on capital gains

Question 3

Chargeable Disposal

Answer 3

Most common example is to sell an asset to another person. Some gifts qualify as well, as do some instances of loss or destruction

Question 4

Chargeable Asset

Answer 4

If an asset isn’t specifically exempt from CGT, it is a chargeable asset

Question 5

Exempt Assets

Answer 5

• Cars are always exempt
• Wasting chattels - tangible, movable property with a useful life of 50 years or less.
• Gilts - treasury stock issued by the UK gov which earn annual interest. Exempt from CGT as they are a qualifying corporate bond (QCB)
• ISA shares
• £200k of VCT shares
• Some EIS and SEIS gains subject to conditions

Question 6

Transfer Between Spouses

Answer 6

Any transfer between spouses is treated as taking place as no gain no loss

Question 7

Annual Exemption

Answer 7

All individuals get an allowance of £11,700. Companies don’t get one.

Question 8

Rates

Answer 8

Basic Rate - 10%
Higher Rate - 20%
ER - 10%

Question 9

Calculation

Answer 9

Any gains falling within unused basic rate band is taxed at 10%, anything above is taxed at 20% unless it qualifies for ER

Question 10

Due Date

Answer 10

CGT is due in full on 31 Jan following the tax year