CH 9 - Corporate Capital Gains

Question 1

What are differences between PT CGT & CT CGT?

Answer 1

• Companies do not get an annual exempt amount (AEA).
• The only relief available to companies is rollover relief
• Companies are entitled to indexation allowance to reduce gains (applicable to assets acquired up to 1st Jan 2018
• Companies do not pay capital gains tax, gains are included in taxable total profits (TTP) and are charged to corporation tax

Question 2

When Rollover relief is avialble to the company?

Answer 2

Rollover relief is available when qualifying assets are disposed of and the net sale proceeds are reinvested in other qualifying assets in the qualifying time period (4 years from the end of AP of the disposal of asset 1).

Question 3

What do we understand under
qualifying assets?

Answer 3

Qualifying assets include:

• land and buildings used for trade purposes (freehold or leasehold), and
• fixed plant and machinery used in the trade (fixed =bolted to floor or building).

(TCGA 1992, ss.152 and 155)

Question 4

What are exempt assets from CGT (CT)?

Answer 4

Exempt assets include:
* chattels where gross sale proceeds and cost do not exceed £6,000;
* wasting chattels with a useful life of 50 years or less (unless capital allowances have or could have been claimed); and
* cars.

Note: goodwill is not a chargeable asset for a company.

Question 5

What the term chattel means?

Answer 5

‘tangible moveable property’

Question 6

What a wasting chattel is?

Answer 6

A **wasting chattel ** is one with a life of 50 years or less and is an exempt asset.

e.g. P&M & movable P&M are wasting chattels

Question 7

How non-wasting chattels are treated for CGT?

Answer 7

For non-wasting chattels, use the following rules:

Proceeds and Cost ≤ £6,000
* Exempt

Proceeds < £6,000, Cost > £6,000
* Loss restricted by deeming gross proceeds to be £6,000

Proceeds > £6,000, Cost < £6,000
* Gain restricted to 5/3 × (Gross proceeds – £6,000)

Question 8

What to do if
movable P&M on which CA have been or could have been claimed are sold at loss/profit?

Answer 8

• sold at a loss, no capital loss is available because relief for the fall in value will already have been given as capital allowances;
• sold at a profit, the capital allowances given will be clawed back and the asset is not treated as an exempt asset. Instead it is treated as a non-wasting asset and the chattels rules will apply to calculate the gain. If the asset is bought and sold for less than £6,000, the disposal is always exempt.