Capital Gains Tax

• What does CGT stand for?

  Capital Gains Tax
• Do companies pay CGT on capital gains?

  No, capital gains are taxed with other income.
• Who pays CGT on disposals of chargeable assets?

  Residents of the UK pay CGT on disposals of any chargeable asset regardless of location.
• Under what condition do non-UK residents pay CGT?

  Non-UK residents do not pay CGT unless disposing of interest in UK land.
• What type of property is exempt from CGT?

  Wasting chattels are exempt from CGT.
• What qualifies as wasting chattels?

  Moveable property with a life of less than 50 years, such as cars and boats.
• What is the exemption limit for non-wasting chattels?

  Non-wasting chattels are exempt from CGT if disposed of for less than £6,000.
• What are the exempt disposals under CGT?

  • Transfer of property on death
  • Transfers between spouses
  • Transfer to charity
• How is the market value determined for property transferred on death?

  The person who takes the property takes it at its then market value (probate value).
• What is the uplifted probate value used for?

  The uplifted probate value is used for Inheritance Tax (IHT) purposes.
• How is a spouse treated in terms of asset transfer for CGT?

  A spouse is treated as having acquired the asset at the same cost as the donor spouse.
• What happens when a business asset is gifted?

  The donor and donee must both agree to defer the CGT payment.
• What is the formula to calculate capital gain?

  Capital gain = Proceeds of sale minus costs of acquisition.
• What is used instead of proceeds of sale if an asset is given as a gift?

  The current market value is used rather than proceeds of sale.
• What costs can be subtracted when calculating capital gain?

  Costs of initial expenditure, selling costs, and costs incurred for preserving the asset can be subtracted.
• What is roll over relief?

  Roll over relief allows gains made to be rolled over onto a new qualifying asset, deferring CGT tax payable.
• What qualifies as a qualifying business asset?

  Land, building, plant, or machinery qualifies as a qualifying business asset.
• How is the base cost calculated for a qualifying asset?

  Base cost = amount of the asset less the gain from the sale of the previous asset.
• What is handover relief?

  Handover relief applies when gifting a business asset, allowing deferral of CGT payment.
• What is the base costs calculation for handover relief?

  Base costs = deemed market value when gifted minus the original purchase amount plus any further gain realized.
• What is incorporation relief?

  Incorporation relief allows deferral of gain when transferring business or partnership interest to a company.
• How is the gain from the transfer calculated in incorporation relief?

  Gain from the transfer is deferred by subtracting the gain from the acquisition cost of the company shares received.
• What is the Enterprise Investment Scheme?

  The Enterprise Investment Scheme allows deferral of CGT by investing in shares of a qualifying unquoted trading company.
• When is the gain chargeable in the Enterprise Investment Scheme?

  The gain is chargeable when shares are sold.
• What are the CGT exemptions and reliefs?

  • Private residence relief
  • Business asset ownership relief
  • Incorporation relief
  • Handover relief
  • Enterprise investment scheme
• What is private residence relief?

  Private residence relief exempts 100% of the gain if the property is always occupied.
• How is the exempt amount calculated for private residence relief?

  Exempt amount = GAIN x (PERIOD OF OCCUPATION / PERIOD OF OWNERSHIP).
• What periods of absence are considered deemed occupation?

  Periods of absence up to 3 years, unlimited absence for employment abroad, and up to 4 years for work in the UK are considered deemed occupation.
• What is the annual exempt amount for CGT purposes?

  The annual exempt amount is £3000

  for trustees it is £1500
• How long does the annual exempt amount apply after death?

  The annual exempt amount applies from the date of death until the next April after death plus 2 years after the date of death.
• How is the taxable gain calculated after reliefs?

  Taxable gain is calculated by deducting the annual exempt amount from the gains after reliefs.
• What is the business asset ownership relief tax rate?

  Business asset ownership relief is taxed at 10% with a lifetime limit of £1M.
• What is the taxable income threshold for the basic tax rate?

  The basic tax rate applies to income up to £37,700.
• What are the CGT rates for residential property?

  CGT rates for residential property are 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers.
• How can capital losses be used in relation to CGT?

  Capital losses can be used to offset gains in the same year before applying the annual exempt amount.
• When is CGT payable after disposal of UK residential property?

  CGT is payable on 31 January following the tax year/disposal and must be paid within 30 days of completion.
• What is the calculation summary for CGT?

  Calculation summary: Sale proceeds/market value minus allowable expenditure equals total chargeable gain.
• What should be done after calculating total chargeable gain?

  After calculating total chargeable gain, any reliefs to defer should be considered.
• How is the taxable gain determined after applying reliefs?

  Taxable gain is determined by applying tax rates to the remaining sum after deducting the annual exemption and any carried forward losses.
• What is the standard rate of tax for basic rate tax payers?

  18%