Capital Tax Flashcards
(35 cards)
Where is the basis of value defined for CGT and IHT
CGT - Taxation of Chargable Gains Act 1992 - S272
IHT 1984 S160
Per VPGA 15.2 the definition of MV is the same for both!
What RICS document is relevant to CGT
Red Book UK National supplement - VPGA 15 Valuations for Capital Gains, Tax, Inheritance Tax, Stamp Duty Land Tax and the Annual Tax on Enveloped Dwellings
What is the primary Capital Tax Legislation
Taxation of Chargeable Gains 1992
What is CGT?
Tax on the gain made from the disposal of an asset
What defines a capital asset
Basically long terms asset which is held to produce a profit
What is the primary IHT Tax Legislation
IHT 1984
What is the definiton of MV for IHT/CGT
Per UK National Supplement VPGA 15.2 they broadly follow same defininition
* Price property might reasonably be expected to fetch if sold on open market,
* but not reduced on the grounds that……
* the whole of the property is placed on market at one and at the same time (flooding of market).
What is the difference between MV for red book valuations and MV for CGT & IHT
Capital tax MV does not account for the flooding of the market and also accounts for special purchasers
What is inheritance tax
- Tax on the estate of someone who has died
- Pay within 6 months of death
- Value immidiaetly before death
For IHT what % is taxed? and what is the normal threshold
40%
325k
When is the standard 40% rate used?
It’s only charged on the part of your estate that’s above the threshold.
What is pruddent lotting?
Selling the estate in lots that would maximise the proceeds of sale
Duke of Buccleugh 1967 - Held that large estate could be subdivided into natural units for valuation purposes
Who pays IHT to HMRC
It is paid from the estate of the deceased normally via the executor
GET(S18) + S19/S20 3k/£250. Charity and Weddings
Name exemptions for IHT
- Gifts for over 7 years (Potentially exempt transfers - PET’s) Less than 3 years not exempt. Between 3-7 years is tapred on a sliding scale
- Estates under 325k - (if transfer to direct bloodline children extra 175k = total 500k this took eff from 06 Apr 2017).
- S18 Transfer to spouse
- S19 - Annual exemption of 3k per year for Lifetime gift
- S20 unlimitted transfer of small gifts up to £250 per recipient
- Difference between S19/20; S19 can c/f to following year if unused S20 cannot. Ammount is different. Application - S19 is intended for larger less frequent gifts, whereas S20 is for smaller frequent gifts
- Gifts to Charities
- Wedding gift for child up to 5k grandchild up to 2.5k and other 1k
BAF
Name IHT relief
Check cos i think we report full value and HMRC apply relief
* Business relief up to 100% in certain circumstances
* Agricultural /Woodland relief
* Fall in value - if after 4 years property sells for a lower price than its value on death, sale value can be value for tax purposes
What are PETs?
This is a potentially exempt transfer and is covered under Section 3 IHTA 1984. Outright gifts between individuals become exempt from tax provided the transferor survives seven years from the date of gift. During the seven year period they are called PETS.
With regard to PETs, what would happen if the transfer was made in the seven year period before death?
- Less than 3 years 40%
- 3 to 4 years 32%
- 4 to 5 years 24%
- 5 to 6 years 16%
- 6 to 7 years 8%
- 7 or more 0%
A-PAT
Name exemptions for CGT
[A-PAT]
- Annual Individual Exemption - 3k for 24/25
- Persons/orgs - Local authorities/Charities/Pension funds
- Assets - Trees in commercial woodland/Chattels worth less than £6,000/Motor vehicles
- Transactions Transfers between spouse or civil partner/Gifts for public benefit
PERI-H
Name relief for CGT
[PERI-H]
* Private residence relief (PRR) - disposal of a house that is your main residence only availble up to permitted area
* Entrepreneurs’ Relief - (For selling business) Now known as Business Asset Disposal Relief since Apr 2020 (sole traders or business partners) [Lifetime limit up to 1m, min ownership of business for 2 years] revised CGT rate of 14%
* Rollover Relief (buy a new asset within 3 years after disposal of old). Basically a deferral of tax
* Incorporation Relief (transfer all your business assets in exchange for shares in a company) Basically a deferral of tax
* Hold-Over Relief (you used the business asset for trading as a sole trader) means u gave the shares of the business away Basically a deferral of tax
(Fall in value relief)
Define CGT threshold 24/25
- £3,000 individual or trustee for disable person.
- £1,500 trusts.
How is capital tax calculated
Gain made on an asset which has been adjusted for indexation
Who pays CGT?
Individual or trustees. A company does not pay CGT but instead they will pay coorperation tax
What is rebasing
In capital taxation it is assumed any asset held at 31 March 1982 has been sold and immediately reacquired at its market value on that date. The effect is that any gain are attributed to that period since then
What is the deemed acquisition date for CGT?
31st March 1982, which is the rebasing date
