Osborne 6: CGT Flashcards
How to calculate part-sale of land ?
Do NOT just proportion it eg. sold a third for £50K so just deduct a third of the £18K cost price.
This is incorrect because the third you sold might have gained Planning permission or something…
Need to do:
A / A+B (A=Sale price; B=Value of retained part) and multiply the cost by THIS fraction to get the cost to deduct amount.
(We’re thinking of value not square feet)
What is ‘chargeable’ gain?
This is the ‘Total’ gain before annual allowance.
Chargable Gain
Less CGT allowance
= Taxable Gain (or ‘amt subject to CGT’ in osborne)
(Similar to ‘Total income & taxable income but the word ‘chargeable’ is a bit misleading… pity it’s not just called ‘total Gain’ !!!)
What is ‘Taxable gain’ ?
or ‘amt subject to CGT’ in osborne
This is the amount to tax AFTER the annual allowance.
Chargable Gain
Less CGT allowance
= Taxable Gain (or ‘amt subject to CGT’ in osborne)
(Similar to ‘Total income & taxable income but the word ‘chargeable’ is a bit misleading)
CGT - Made a loss
Cost >£6K & Proceeds <=£6K ??
Restrict the loss
Make proceeds £6K
CGT- Made a Gain
Cost <=£6K & Proceeds >£6K ??
What’s the extra rule to remember?
HMRC being ‘kind’
- Work out gain normally.
- Work out ‘restricted gain’ (5/3 of proceeds minus £6K)
(BUT U don’t get to make deds on restricted gain calc)
Take the Smaller gain
Eg bought £3K sold £9K
* £6K
or
* 5/3 of £3K = £5K (BUT you don’t get to make deds)
So gain restricted to £5K even though was really £6K
What is the actual threshold for the CGT rule about restricted gain/loss ?
£6K or less
Disposal rises when asset is
Sold, given lost or destroyed.
2 situations where disposal does not give rise to CGT?
- Disposals arising because the owner has died.
2. Any disposal between spouses or civil partners
Asset must be ‘chargeable’ asset to give rise to CGT.
List of main exempt assets…
(Rule is if not exempt then must be chargeable)
- Private residence
- Cars
- Wasting chattels
- Chattels are tangible, moveable items.
- Wasting chattels est. life <50 yr.
- Chattels b&s for
Exempt amount ? - can be b/f or c/b?
12,300
No - use it in current year or lose it
Private residence
Exemptions (5)
Always apply
* main residence at any point during ownership.
- Actually occupied as main residence.
- Last 9M of ownership (So I think u lose this if you really did occupy it in those 9M)
Periods of absence that count as being occupied:
- Property was actually occupied as MR at some time both BEFORE AND AFTER the period of absence.
- No OTHER property is being treated as MR during period of absence.
- 3 years total for any reason.
- Up to 4 years absence due to UK employment
- Any period when the taxpayer is living abroad due to employments.
Chattels are ?
Which are exempt?
Tangible, moveable items
- Wasting chattels (<50 yr life)
- Cars
- B&S < £6K
Chattels sold >£6K rule?
Limit the gain (good - optional)
5/3 (Proceeds* - £6K)
- Total proceeds, don’t deduct selling expenses
Chattels sold
Limit the loss (not so good - not optional)
Substitute £6K for the proceeds (‘deemed proceeds)
Are advertising costs an allowable deduction for CGT as they are revenue?
Yes they are allowable
EXCEPT if using the limited gain rule
Shares
How to do the ‘pool’
Just list out the items in 3 columns: date; no. of shares; total paid.
Then for the disposal do the number of shares disposed of and use that divided by total pool shares to get a fraction to then use with the pool total cost amount to find the ‘cost’ of the ones disposed.
Don’t get confused and put the £amount sold for in the pool calculations … that is used in the second step along with the cost just calculated to work out the Gain for CGT
