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
When osborne talks about bonus shares and rights issues being assumed at the date of the original shares …
This doesn’t mean use the original date when drawing up the pool … I think it just means these shares are not ‘caught’ in the same day or 30-day rule… ie don’t start ‘matching’ these ones with a disposal.
when calculating gain on house disposal
x/x months * total gain
osborne rounded the gain down to the next £ even though it was .645
.
chattel marginal relief
this is name for the 5/3 rule
CGT on gift to friend - what ‘proceeds’ to use?
actual, deemed @ mv, no gain or loss
ALWAYS deemed @ MV for a GIFT
but wd use actual for a friend if sold even if less than mv
Government securities ‘Gilts’ - CGT chargeable?
No
Chattel
If bought for £5K and sell for £2K can use the loss?
No I don’t think so … see osborne w/b 6.7
its just exempt
unquoted shares - chargeable?
yes chargeable
Losses
How to handle
All current year losses must be set against current year gains
Even if this means ‘wasting’ the annual exempt amount.
Capital losses b/f are used AFTER the annual exempt amount and their use is restricted to the amount needed to bring taxable gain to zero.
Can you deduct accountant fee for calculating cgt ?
Nope
Can you deduct legal fees to do with the purchase of the asset?
Yes
You use up income tax bands to work out how much cgt @10% and how much @20%….. what about personal allowance?
No even if your income is below the personal allowance of 12500 you don’t get to utilise it against taxable gain…. it would still be 10%
Enhancement or Improvement expenditure
what is this and how to deal with?
Spend of a capital nature to enhance… then disposed of enhanced… this is allowable cost
eg
Professionally restore antique. (not insuring it)
Add extension to building. (Not repairing it)
BPP used a NEW roof.. and specified that the old one was damaged PRIOR to aquisition
Brother in Law and Sister in Law - connected?
Connected.
A BPP example asked connection where it was har husband’s sister and sister’s spouse (ie on the other side) and these WERE connected.
So its your siblings and their spouses but also husbands siblings and their spouses,
So if see brother-in-law or sister-in-law no need to dig into side … they are connected to you
when using the 5/3 of amount >£6K to limit gain you do NOT take off the expenses…
what about when limiting the loss by using deemed proceeds £6K ?
In this case you DO take off the expenses.
Make sure you don’t ‘deduct’ them from the Loss and make the loss smaller by mistake!!!
PPR
What to watch out for about relief for working abroad…?
If it’s ‘self-employed’ abroad it does’t count..
You can use the 4yr ‘place of work’ for this but not the ‘unlimited’ work abroad. … when I think about it I can see why :)
so look for
‘required’ to work abroad by employer. (OK)
‘posted’ abroad by employer. (OK)
‘went abroad to work as self-employed engineer (NOT)
Are cars, vans and motorbikes all CGT exempt?
No - only cars
Is a factory used in a trade exempt from CGT?
Nope
when working out CGT on sale of part of field and that part had had drainage installed …. how to handle the cost.
Yes deduct the cost from the sale … think about the fact that this ‘improvement’ will be reflected in the sale price of that part
asset bought 6k and sold 5k … limit the loss?
no because its <=6k is exempt … so this is exempt asset.
although if you forgot and made proceeds 6k you would get the same result!
