Capital Relief

Question 1

How do you calculate PRR

Answer 1

No gain if you have lived there whole time. PRR reduce gain if you haven’t lived there whole time.

Gain × Periods of occupation/Total period of ownership.

Final 9 months counts towards occupation always

Question 2

What are the PRR rules?

Answer 2

Occupation includes: 3 years of absence, any period working abroad, 4 years of absence while working in UK.

To qualify for deemed occupation you must return to home at some point.

No PRR for non-residential use so remove from calc

Question 3

What is letting relief?

Answer 3

If you lived and let the property at same time you can get relief on gain upon disposal unless lodger lives as family member (get full PRR relief not letting.

Relief: Lower of…
£40,000
PRR
(taxable period / total period) x gain

Question 4

What is BPR? Give rules

Answer 4

IHT relief on life and death transfers of relevant business property.
Comes below transfer in stage 1 IHT.

100% relief on transfer of whole unincorporated business or share of it or shares of unquoted business.

50% relief on shares from controlling 50%+ holding in quoted company or NCA used for business purpose by company controlled by transferror

Question 5

How do you treat BPR on assets not used wholly for business?

Answer 5

These are excepted assets. Value eligible for BPR= Transfer x (net asset - excepted asset)/net asset

Question 6

What is holdover/rollover relief

Answer 6

Gain from disposal of qualifying asset (goodwill, NCA) is frozen till chargeable OR
gain reduces cost of new asset.

If proceeds used in depreciating asset (60 yrs max) use holdover. Gain chargeable at earliest of sale, ceasing to use asset, ten years from purchase

Question 7

What is BADR and list qualifying disposals

Answer 7

first £1m of gains from disposal of qualifying assets taxed at 10% after loss and AEA deduction

Qualifying disposals= unincorporated trading business, assets of business within 3 yrs ceasing to trade, shares in personal trading company where individual is employee or officer (owns min 5%, gets 5% div OR 5% proceeds from sale of company)

Question 8

Explain how to calc gift relief

Answer 8

measure gain: MV - Cost
gift relief= difference in MV and price charged

gain - gr = CG