CGT

Question 1

What are the conditions must be met in order to be able to claim BADR on the disposal of assets

Answer 1

1. It must be either Whole or a separately identifiable portion of the business being disposed of.
2. The asset must be held for at least 2 years.
3. The asset must be used in the natural course of the business#
4. If Goodwill is being disposed of, then no BADR relief is available upon disposal.

Additionally, it is worth noting that BADR disposal will have to use up the basic rate band before any other disposals

Question 2

What do we need to consider in respect of BADR relief if a business is ceasing

Answer 2

If the business asset is sold within 3 years from cessation, you will still be able to claim BADR. If the disposal is in connection with a building, then what the building is used for between this period is not relevant

Question 3

What is an “associated Disposal” and what are some of the factors we need to consider when we have one

Answer 3

• When we have personal ownership in a business and shareholding, we need to think about an associated disposal. This takes place where someone is disposing of an asset they personally owned back to the trade upon leaving the trade (i.e. also selling the shares)
• This relief is also pro-rata to the between the length of time held by the individual and the length of time it was used in the business

Question 4

What do we need to think about in respect of depreciating assets for CGT & What is a depreciating assets.

Answer 4

A depreciating asset is one that has a useful of 60 years - wasting chattels have a useless life of 50 years but there is also a condition that if it is going to become a wasting chattel in the next 10 years, it is also eligible for this.

What this does it is allows us to claim rollover relief where instead of reducing the base costs of the replacement asset, we are allowed to defer the gain

Question 5

When is a deferred gain crystalised.

Answer 5

1. When the asset is sold
2. When we stop using the asset in the trade
3. 10 years following the initial disposal

Question 6

Is part relief available for rollover relief?

Answer 6

If the asset is used partly for business and part for personal use. for example, if a property is part of a shop and part of a flat then you will be able to claim rollover relief on the percentage of the asset that was used for the trade

Question 7

What are some of the conditions on gift relief and when is it available

Answer 7

Gift relief can be received when “gifting” a qualifying asset to anyone, under TCGA 1992 s.17 this rule applies whether or not the person is connected

you can claim gift relief on:

1. Any number of UNQOUTED shares.
2. at least a 5% holding in a QUOTED Company
3. Assets used in a business
4. Agricultural land & buildings used for Farming.

there is also restrictions on the amount of gift relief available - this restrictions taxes place where the donor gives away shares in a personal trading company and that business holdings “non-business assets”

the formula for this is:
gain x (chargeable business assets/chargeable assets)
chargeable assets are things like premises/goodwill and chargeable assets would be shares in another listed company

Question 8

What are the restrictions on the use of gift relief for CGT purposes

Answer 8

If someone is giving away shares in a personal company then this can restrict the amount of gift relief available and this calculation is done as by:

Chargeable Business Assets / Chargeable Assets x Gain

A chargeable asset is any asset which would be chargeable under the normal CGT rules - a Chargeable business asset is any which is used in the course of the trade.

we would want to think about the following:

Premises - CBA
Shares - CA

Question 9

When must a claim for holdover relief relief be made (deffaral of gains on wasting chattels)

Answer 9

A claim for rollover relief must be made withing 4 years of the tax year when the gain arises or when the new asset is acquired (whichever is later). Additionally a provisional claim can be made on the following 31st Jan after the tax year if the replacement hasnt been bought

Question 10

When is the tax payment date for capital gains taxes

Answer 10

it is the 31st January of the following year after the tax year (i.e. 24/25 - 31st January 26)

Question 11

When must the an asset be purchased for rollover relief be made

Answer 11

This must be made within 1 year prior to the disposal or 3 years after

Question 12

What do we need to consider in this situation “In January 2017, Veronika bought another property for £140,000. The ground floor was immediately opened as a cake shop. The first floor, a flat of equal size to the ground floor, was immediately occupied rent-free by Veronika’s daughter, who continues to occupy it.” - in respect of CGT

Answer 12

This case we have been told that something has been used in the business which was charged as the lower of market value and therefore it will be restricted in the amount of gift relief that can be used, this will be restricted in the portion of the asset that was used at lower then market value in relation to the whole asset

Question 13

Would stock & plant and machinery need to be considered for capital gains tax

Answer 13

no, if we have a question and elements including plant & machinery along with stock has been sold then they wouldn’t be included within the scope for CGT

Question 14

If we have a sale of an asset for CGT and we have various legal dates. which one do we use for CGT purposes

Answer 14

We would want to use the date of EXCHANGE for the purpose of CGT gains and not necessarily the date of COMPLETION

Question 15

What do we need to consider if shares have been gifted in order to encourage an employee to join

Answer 15

Under this instance, the shares will be treated as a form of employment income and will chargeable to NICs if they are a RCA. We also need to be mindful that a CT deduction would be available on the Income tax charge