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Flashcards in CGT Deck (10)
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1

Do you have to be living with your spouse to get the spouse exemption?

Yes

2

What is a negligible value claim?

It is worth next to nothing and can be submitted to HMRC as a loss

Can be backdated to 2 years before the tax year of the claim

3

What does a disposal not at arms length mean

When an asset is given away cheaply. The person receiving and the market value should be based on the market value and not the amount exchanged

4

Explain the chattel rules

Step 1 Work out the amount by which the disposal exceeds £6,000.


Step 2 Multiply the figure at step 1 by x 5∕3.


Step 3 The result is the maximum chargeable gain.


Step 4 Work out the net gain using the Capital Gains Tax normal rules


Step 5 Include in your CGT calculation the lower of the net gain (step 4) and the maximum chargeable gain (step 3).

5

How would a wasting asset e.g. a yacht be CGT taxed

If a wasting asset has a lifespan of under 50 years they are exempt from CGT

6

What is the formula for part living in a private residence

Part of the gain may be taxable if the seller has not occupied the property as their only or main residence throughout the period of ownership. In this instance, the proportion of the gain that is exempt is:
Total gain × period of occupation total period of ownership

Exemptions:

-first year of purchase
-last 18 months
—3 years providing they had no other residence

7

How do you decide which residence to make as main residence

Can opt for which home is main residence as long as they have lived there at some pint.

Can do this within 2 years of house being purchased and cannot be backdated more than 2 years

8

When do you report a CGT loss

Losses must be claimed within four years of the end of the tax year in which they were made. This is a requirement whether or not the loss is used in that period.

9

What is the prortionate gain figure

Where a disposal is only of part of an asset, the cost is calculated using an apportionment formula:

A
——
A + B

X original cost

A:part disposal proceeds

B:market value of part retained


10

Explain entrepreneurs relief?

£10m taxed at 10% CGT
-have to own assets for 2 years
-owns at least 5% of voting rights