Computing Chargeable Gains (2)

Question 1

What is enhancement expenditure?

Answer 1

Capital expenditure which enhances the value of the asset and is reflected in the nature of the asset at time of disposal

Question 2

What is excluded from enhancement expenditure?

Answer 2

Cost of repairs and maintenance, insurance

Expendituer deductible from trading profits

Any expenditure met by public funds

Question 3

WHen individuals have an annual exempt amount of £6000?

Answer 3

FIrst £6000 of chargeable gains made by the individual in the tax year are not taxable

Question 4

What is the individual’s taxable gains?

Answer 4

Annual exempt amount is deducted from chargeable gains for year after deduction of current year losses and other reliefs

Question 5

What do rates of CGT depend on?

Answer 5

Indnvidual’s taxable income and the type of asset

Question 6

After considering taxable income for income tax?

Answer 6

Gains above annual exempt amount are taxed at 10% if they fall into any remainin basic rate band, and 20% where they exceed this threshold

Question 7

What are basic and higher rate limits used for?

Answer 7

CGT as for income tax

Question 8

What does CGT include?

Answer 8

Any increases due to gift aid and/or personal pension contributions

Question 9

How are taxable gains on property taxed?

Answer 9

At 18% (basic rate) and 28% (higher/additional rate)

Question 10

How is CGT payable (unless it’s a residential property)

Answer 10

CGT is payable on 31 January after the end of the tax year of disposal

Question 11

Disposal of residential property in CGT?

Answer 11

A payment on account must be made to HMRC within 60 days of the disposal, along with a return

Question 12

What does payment on account take account of?

Answer 12

Annual exempt amount

Brought forward capital losses

Capital losses during same tax year only up to date of residential property disposal

Question 13

First consideration of CGT planning?

Answer 13

An individual should make use of the annual exempt amount

Question 14

Second consideration of CGT planning?

Answer 14

Rate of tax in relation to individual’s taxable income

Question 15

Third consideration of CGT planning?

Answer 15

Timing of the payment of CGT

Question 16

If there is a gain which already uses the annual exempt amount in the tax year?

Answer 16

It may be advisable to delay making another gain until next tax year

Question 17

How should gains be made in the tax year?

Answer 17

In which individual has lowest amount of taxable income, in particular where they have part of basic rate band unused

Question 18

Why is it better to make a gain early in a tax year rather than late in a tax year?

Answer 18

Give the longest gap between receiving the proceeds and paying the tax due