Personal tax planning Flashcards
What are the capital gains basic rules
Must be a chargable
Asset
Person
Disposal
What can you offset against CG?
Trade losses!
The date of exchange of contract determines X ? And the payment on account is based on the X?
Which tax year the gain falls into
Date of completion, as this is the day money exchanges hands.
Who are chargable persons?
Individuals
Partnerships
Companies
Trustees
Chargeable disposals include?
Gift
Sale at undervalue
Loss/distruction
What counts as an exempt transfer?
To a charity
Transfer on death
Which assets are specifically exempt?
Cars
Governemnt stocks / Gilts
Qualifying Corporate Bonds
Wasting chattels
Currency for personal use
Medals awarded or inherited (not purchased)
National savings certificates
Gambling winnings
Chattels sold at a gain where proceeds and cost or both under £6,000
Negligible value claim
If a chargable asset becomes negligible in value, you can elect to “sell” and “rebuy” this asset generating a loss.
Can be done anytime up to 2 years before the start of the tax year of the claim but it must have been neglibile in value then too
Assets being put into trusts - If a settlor puts an asset into a trust
It will be trezted as a disposal for CGT purposes at market value and gift holdover relief will be available unless a settlor interest trust
It is/isnt’t possible to claim gift holdover relief when putting assets into a settlor interest trust which is
Is not
A trust from which the settlor or their spouse or child can benefit from
when an asset leaves a trust
There wqill usually be goft holdover relief as it will generate inheritance tax when a property leaves a trust
Current year capital losses are offset against
Current year gains before using the AEA
Losses b/f are used
After using the AEA
Losses in the year of death are
Carried back on a LIFO basis and offset after the AEA amount
Land - small part disposals
If a small land disposal is made, it can be ignored, but the proceeds must be deducted from the cost at sale.
Claim must be made by the 31st Jan the year after the tax return deadlineW
What are the two extra conditions required for a small land disposal?
Aggregate sales in the tax year must not exceed 20k
Proceeds cannot exceed 20% of the land market value prior to disposal
A related person for CGT is
An immediate family member or their spouse. So Child, parent or brother/sister
A connected person for companies are the people who control it
Sales to a connected person are treated as at
Market value
Losses from sales to a related person can only be
relieved against current and future gains on disposals to the same person
When a partnership makes a gain
The gain is apportioned to all aprtners in their profit ratio
What is a chattel?
Tangible moveable property that can be watsing or non wasting
A wasting chattel has a life of 50 years or less
Chattels bought and sold for less than X? are exempt?
£6,000, so no chargeable gain or loss arises
What types of wasting chattels are not exempt from CGT?
Ones that are plant and machinery and are eligible for capital allowances, if these cvhattels are sold for less than cost though there is no CGT loss generated as it is dealt with via capital allowances.
Wasting assets are written down
On a straight line basis. If disposed of 10 years into the useful life of 40, only 10/40 of the cost can be used as the cost.
The assignment of a lease is when
A lessee sells their entire interest
There is a grant of a lease when
There is a lease granted from a freehold or existing leasehold
On the assignment of a short lease
The cost must be depreciated to reflect that the lease is losing value
Original cost x (X/Y)
X % of the years left on the lease
Y % of the number of the years the lease had at the start
If an asset is lost or destroyed, the date of disposal is
the date of the compensation proceeds
If a similar asset is purchased within 12 months with the proceeds
Rollover relief is available
If all of the proceeds are used to purchase the asset then any gain is deducted from the cost
If pnly part of the proceeds are reinvested, then the gain is chargable but is limited to the amount not used
If an asset is damaged
It is treated as a part disposal.
Where
A = Compensation money
B = Unrestored value of the asset
However, the owner can elect to
Avoid a part disposal.
The compensation money recieved can instead be deducted from the cost of the asset if the sum is:
Wholly used to restore the asset
Partially used but the unused portion is small (higher of 5% purchase price and £3000).
Small compared to the value of the asset (higher of 5% purchase price and £3000).
