Chapter 12 - Corporate Capital Gains Flashcards Preview

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Flashcards in Chapter 12 - Corporate Capital Gains Deck (16)
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1

Intro

A company pays corp tax on capital gains arising on the disposal of a chargeable asset. Similar calc to inidividuals, except companies can claim indexation allowance and companies do not at an AE or ER

2

Note

Cars aren't chargeable assets

3

Calculation

Proceeds less selling costs.
Deduct acquisition cost.
Deduct incidental costs of acquisition
Deduct enhancement expenditure
This gives unindexed gain
Then subtract indexation allowance
Gives indexed gain

4

Indexation Allowance

Indexation factor is the movement in the RPI between date of acquisition and date of sale (up to 31 Dec 2017). Indexation factor:
(RPI @ sale or 31/12/17 - RPI @ acq) / RPI @acq
Round to 3dp always.

5

Enhancement Expenditure

Added to the base cost, might need to be indexed separately if the enhancement occurs at a different date to acquisition (up to 31.12.17).

6

Capital Losses

Computed in same way as gains. Indexation CANNOT create or increase a capital loss. It can only reduce a gain to zero

7

Rollover Relief

Where a co sells one qualifying asset and buys another qualifying asset(s), the gain on the sale of asset 1 can be deducted from the base cost of asset 2 upon making an election. Asset 2 must be bought between one year before and three years after the disposal of Asset 1

8

Rollover Relief Election

Only applied when the co is selling assets used for purposes of trade. Apportion where only some of the use is for trade.

9

Eligible Rollover Assets

Land and buildings
Fixed plant and machinery, ie bolted to the floor

10

Rollover Claim

Must be made within 4 years of he end of the AP of the disposal of asset 1 or purchase of asset 2 (whichever is later)

11

Rollover Relief - Proceeds Not Fully Invested

If proceeds are not fully reinvested, a gain equal to the cash retained is left and is chargeable

12

Rollover Relief - Depreciating Assets

Depreciation asset has a useful life not exceeding 60 years. Plant and machinery is always a depreciating asset.
A lease of not more than 60 years on land and buildings is also a depreciating asset.

13

Rollover Relief - Depreciating Assets cont.

If the asset purchased is a replacement, and a depreciating asset, relief is given by freezing the gain on the old asset.
The frozen gain will then crystallise on the earliest of:
- sale of the depreciating asset
- ceasing to use the depreciating asset for trade
- 10 years from acquisition of the depreciating asset

14

Shares

Use share matching rules to group the shares:
1) co is deemed to have sold any shares acquired the same day
2) deemed to have sold shares acquired in the previous 9 days in FIFO basis. No indexation allowed
3) deemed to have sold shares acquired from 1.4.1982 to 9 days before the sale (s.104 pool)
Once the shares are matched, calculate the gain for each match.

15

S.104 Pool

If there's multiple acquisitions in s.104 pool, each share in that pool will be treated as having a base cost equal to the average cost of the shares int he pool at the date of sale

16

S.104 Indexation

1/4/1982 - 31/3/1985: index each acq and include in the pool
1/4/1986 - 31/12/2017: indexation calculated on pool as a whole and is NOT rounded to 3dp.
From 1/1/2018 : no indexation