Chargeable gains and capital gains tax liabilities

Question 0

What sources, apart from cash, can be regarded as remittances? (3)

Answer 0

Bringing in property which was purchased out of overseas income/gains

Paying services out of overseas income/gains

Using overseas income/gains to pay interest/capital on debt….

Question 1

What are the conditions necessary for the special treatment on purchase of a company’s own shares? (6, acrym)

Answer 1

TURFSS => ownership => own shares disposal

Trading company’s benefit
Unquoted shares
R esident and ordinarily resident shareholder in the UK
F ive years shareholder has owned the shares.
S hareholder must dispose of entire holding or must own < 30% of the shares.

Not available if sole purpose is tax avoidance

Question 2

What cost items are included when calculating indexation allowance? (3)

Answer 2

Costs, fees associated with cost and renovations

Question 3

What group companies are eligible for group relief? (2)

Answer 3

Companies with effective ownership of 75% and over.

They must also be within the same group structure excluding groups under shared shareholder ownership

Question 4

How is additional amount needed for full rollover relief calculated? (2)

Answer 4

The capital proceeds/cost are reduced by:

Non business use during the period of ownership
The level of business use of the new asset

Question 5

What are the tax consequences of an approved/unapproved share option plan? (4)

Answer 5

When option is granted:
Approved/Unapproved plan - no CGT

When option is exercised -
Unapproved plan - income tax and class 1 NIC year excercised
Approved plan - no income or NIC

Question 6

What is the deemed cost of shares on the eventual sale under approved/unapproved plans? (2)

Answer 6

Unapproved plans - cost based on market value on exercise

Approved plans - cost based on exercise price

Question 7

What are the gifts available for Gift holdover relief and timeline for election? (6, acrym)

Answer 7

Furnished holiday letting
Agricultural property
Sole trader and partnerships chargeable assets used in the bus.
Personal company shares >5% 
Unquoted shares
Discretionary trust gifts in and out

Election to be made within 4yrs of gift

Question 8

What are the conditions necessary for an individual to claim entrepreneur’s relief? (3)

Answer 8

Must own asset for at least one year prior to disposal

Claim must be one year from 31st January after the tax year of disposal

Disposal must be a qualifying asset

Question 9

What assets qualify for entrepreneur’s relief? (4)

Answer 9

Disposal of whole business and not just an asset used in the business

Trading company where individual holds a 5% share, is an employee and not limited to type of asset

Asset used by company or personal company

Disposal of a furnished holiday letting

Question 10

What are the conditions necessary for an individual to claim ER on an associated disposal? (3)

Answer 10

Must own the asset for at least one year

No longer participating in the business

Individual disposes of there share in business or personal company

Question 11

What matters do one need to be aware of when using the installment method for payment of CGT? (3)

Answer 11

The election should be made by the first January after the tax year of disposal

Interest will be charged on the outstanding balance of the tax liability

Remaining installments to be paid one sale of asset to connected person

Question 12

What are some of the items to be considered when calculating CGT?(5)

Answer 12

Sale proceeds/gift at MP, less cost, EIS relief, A/E, tax @ relevant rate.

Question 13

What are the CGT implications of selling Qualifying EIS shares some time into the future?(4)

Answer 13

Gains deferred chargeable in year of sale, gain or loss treated according to years held (exempt >3yrs), losses also allowable irrespective of sale

Question 14

What are the CGT implications of selling Qualifying EIS shares some time into the future?(4)

Answer 14

Gains deferred chargeable in year of sale, gain or loss treated according to years held (exempt >3yrs), losses also allowable irrespective of sale

Question 15

What are the CGT implications of selling Qualifying EIS shares some time into the future?(4)

Answer 15

Gains deferred chargeable in year of sale, gain or loss treated according to years held (exempt >3yrs), losses also allowable irrespective of sale

Question 16

What is the general rule for one to claim the remittance basis and when is the remittance basis charge applicable?

Answer 16

Can be claimed by resident persons who are not domiciled in the UK.

The charge is applicable for persons who are resident 7 out of the 9 previous tax years incurring a charge of £30,000

Or persons who are resident 12 out of the last 14 years incurring a charge of £50,000

Question 17

What period within which assets must be acquired to claim roll over relief?

Answer 17

Within 4 years of purchase, one year before and three years after purchase

Question 18

What capital allowances are available in respect of electrical, water and heating systems?

Answer 18

They are classified as integral features, such that they are included in the special rate pool where the writing down allowance is only 8%

The annual investment allowance should be set against additions in priority to those assets which qualify for the 18% writing down allowance

Question 19

What must one consider when calculating the increase in tax cost for the sale of the shares being subject to income tax as opposed to capital gains tax?

Answer 19

Grossing up net proceeds (100/90)
Assessable income increased by gross proceeds
Subject to dividend rate at 32.5 or 42.5% on gross proceeds
Loss of personal allowance at 116,210 limit in calculation
Reduced by tax credit on dividend