Exemptions Flashcards
BADR (Business Asset Disposal Relief)
For individuals on following disposals:
Sole trader
Partnerhship interest
Shares in a trading company which is the individuals personal company (5% owned for at least 2 years), must be an employee or officer.
Cannot include any investments
Results in 10% CGT
EMI (Enterprise management incentive)
Shares acquired via enterprise management incentive share options. No need to own 5%, ownership is from grant date.
Qualifies for BADR
Investor Relief
New ord. shares in an unlisted trading company (or holding company of a trading company), which were subscribed for by the individual making the disposal
And. Issued on or after 17 Mar 2016. Must be held for at least 3 years.
Cannot be an employee or officer of company.
10% rate with £10m lifetime limit
EIS Relief
Individual disposes of a chargeable asset and invest in an Enterprise Investment Scheme (EIS) shares, the gain of the asset can be deferred.
EIS shares must be issues between one year before and 3 years after disposal. Can claim either the amount of gain or the amount for shares.
EIS relief deferred gain
Becomes chargeable when:
Shares disposed of by investor or investors spouse
Investor becomes non-UK resident within 3 years of share issue (or spouse)
EIS shares cease to be eligible for relief
SEIS relief
If an individual disposes of any chargeable asset and subscribes for a qualifying Seed Entherprise investment scheme in the same year.
Deferral of either
50% of gain matched with the amount invested or amount specified in claim. Can use either amount (to use AEA)
Claim must be made within 5 years from 31 Jan following the end of the tax year the shares were issued.
SEIS relief withdrawal
Disposal within 3 years of acq’n
If shares are not disposed of at arms length (gifted / under value) then all relief is withdrawn
Disposed of at arms length, restricted to 50% of consideration received
Substantial shareholding exemption
All or part of shareholding is exempt
Conditions:
Holding 10%
Held for 12 months out of last 6 years
Must be a trading company or holding co of trading co
Non-advantaged share schemes
No tax at grant date
Exercise date = income tax at MV (at exercise) date less exercise price
Disposal = CGT = Proceeds less MV (at exercise)
Tax-advantaged share schemes
No tax at Grant or Exercise.
Disposal = CGT = Proceeds less cost
Company share option plan (CSOP)
Must be exercised between 3 and 10 years of grant, employee can be granted up to £30k (MV at grant)
No income tax or NIC on grant date
Sale of shares = CGT
Enterprise management incentives (EMI)
A qualifying entity can grant employees share options worth up to £250k each (max of £3m for entity)
Company can set targets to be achieved
Can me at discounted prices
No tax at grant
No tax at exercise unless issued at a discount (tax on the lower of the MV at grant -actual paid, and MV at exercise - actual paid)
CGT on disposal
Share incentive plan (SIP)
SIP buys shares and holds them on behalf of the employees.
No tax when issued.
Taxed when shares removed from plan
>5 years = no IT or NIC
3-5 years = IT and NIC on the lower of MV at award and MV at withdrawal
<3 years = IT and NIC charge based on MV at withdrawal
No charge for CGT if sold immediately when taken out. Charge when shares increase in value after withdrawal from plan
Temporarily non-UK resident
If an individual is UK resident for more than 4 years and then becomes non-UK resident for a period of less than 5 years then returns to be a UK resident any CGT disposals are chargeable at point when resident again
UK resident tests - automatic overseas test
Order: Auto overseas, Auto UK, Sufficient ties
Two automatic not are included in tax tables.
Works full time overseas and not in UK fore more than 90 days
UK resident tests - automatic UK test
Order: Auto overseas, Auto UK, Sufficient ties
1 in tax tables.
In UK for 30 days and only home in UK.
Full time work in UK during 365 day period (any of which fall in that tax year)
UK resident tests - sufficient ties test
5 ties:
- Close family (spouse or minor child).
- House in UK available for 91 days and used once.
- 40 days work in the UK (substantive work).
- Being in the UK for 90 days during either of the last 2 tax years.
- Spending more time in the UK than in any other country (only relevant if the person was previously UK resident).
Remittance basis
Charge in tax tables.
If use remittance basis removes personal allowance and AEA
Double tax relief
Tax reducer (calc corp tax first then reduce to get payable)
Lower of UK tax on overseas income, and
Overseas tax paid.
Close company conditions
5 or few shareholders (or any number of director shareholders)
shareholder = individual plus associates (spouse, children, siblings, parents)
Distributions to shareholders before and after liquidation process
Before = dividend After = Capital gains
Any benefits to shareholders that arent employees (Cars / gifts) are treated as dividends
Takeovers (cash & shares)
Only cash is taxed as CGT now unless its less than 5% of proceeds value or below >3k
Double tax relief
Lower of the UK tax and overseas tax on the specific overseas income.
This will be deducted from total UK corp tax on all income.
R&D relief (only for small or medium sized enterprises)
Staff costs, consumables, software, fuel, power, water. Not rent or costs for acquiring rights.
Only on revenue expenditure not CapEx (CapEx = 100 FYA)
Relief = 230%. Except external staff limited to 65%.
