Chargeable Gains for Companies

Question 1

what is the main difference for calculation of chargeable gains between companies and individuals?

Answer 1

companies get allowances for inflation

(indexation allowance)

Question 2

do companies get an annual exemption for chargeable gains?

Answer 2

no

Question 3

indexation allowance?

Answer 3

companies receive an indexation allowance

gives relief for inflation between the month of acquisition and the month of disposal (or Dec2017 if earlier)

Question 4

what relief is available for chargeable gains for companies?

Answer 4

rollover relief / holdover relief

Question 5

what are the main differences for handling capital gains between companies and individuals?

Answer 5

• indexation allowance for companies
• no AEA for companies
• treatment of capital losses and shares and securities differs
• only relief available to companies are rollover/holdover relief

Question 6

RPI?

Answer 6

retail price index

used to calculate inflation from purchase to disposal

Question 7

indexation factor calculation?

Answer 7

(RPI for month of disposal - RPI in month of expenditure ) / RPI in month of expenditure

round the figure to 3 decimal places

multiply this by the cost, and that’s the indexation allowance

Question 8

must the indexation factor be rounded?

Answer 8

yes to three decimal places

Question 9

does indexation allowance still exist?

Answer 9

no, it stopped for companies in 2017

e.g., if item was sold in 2025, the dates only range up to 2017

Question 10

for assets acquired after dec2017, is indexation allowance available?

Answer 10

no

Question 11

if enhancement expenditure has been incurred, how does this impact indexation?

Answer 11

a separate indexation factor needs to be calculated

Question 12

what is indexation factor applied to to give indexation allowance?

Answer 12

cost (including incidental costs of purchase)

Question 13

can indexation allowance be deducted to create a capital loss?

Answer 13

no

cannot create nor increase a loss

Question 14

how are capital losses treated for companies?

Answer 14

must be offset against current year chargeable gains (same for individuals)

any remaining loss is carried forward and offset against future gains

the amount of capital loss carried forward which can be relieved in a period is restricted

Question 15

can capital losses be carried back?

Answer 15

no

can only be carried forward or offset against current year gains

Question 16

matching rules for gains on shares for companies?

Answer 16

• shares acquired on same day
• shares acquired 9 days before the disposal
• shares in share pool

Question 17

is indexation allowance done for disposal of shares?

Answer 17

not for shares acquired during 9 days before sale

in the share pool, indexation must be calculated at each operative event (without rounding the indexation factor)

Question 18

operative event?

Answer 18

occurs when shares are acquired or sold

(other than in a bonus issue)

Question 19

do you round the indexation factor on disposal of shares?

Answer 19

no

Question 20

how does indexation work for shares?

Answer 20

indexation is added to the share pool cost

Question 21

how do rights issues work for shares?

Answer 21

rights issues add new shares and cost into the pool

operative event

Question 22

how do bonus issues work for shares?

Answer 22

bonus issues add shares to the pool, but no added cost

not an operative event

Question 23

difference between rights issues and bonus issues?

Answer 23

rights issues add to the cost of the share pool, bonus issues do not

Question 24

would indexation apply to bonus/rights issues?

Answer 24

rights issues = yes, as it’s an operative event

bonus issues = no, as it’s not an operative event

Question 25

what occurs every time there's an operative event in a share pool?

Answer 25

indexation to account for inflation

Question 26

substantial shareholding exemption?

Answer 26

no chargeable gain/loss arises on disposal out of a substantial shareholding (>10%) in a trading company (must be a trading company)

Question 27

can substantial shareholding exemption apply to individuals?

Answer 27

no only applies to companies

Question 28

substantial shareholding?

Answer 28

10% which has been held for a continuous period of 12 months of the 6 years prior to disposal

Question 29

for substantial shareholding exemption, must the selling company be a UK company?

Answer 29

yes

Question 30

are non-resident companies subject to CT on gains?

Answer 30

yes, gains that involve the disposal of UK residential property base cost is MV on 6Apr2015 election can be made to recognise the whole gain/loss over the whole period of ownership second election can be made to time apportion the total gain over the whole period

Question 31

when is CT due fo disposal of UK residential properties?

Answer 31

within 60 days of completion

Question 32

are non-uk residents subject to CT on gains involving non-residential property?

Answer 32

yes, from 6Apr2019 either taxed on MV at 6Apr2019 or can elect the cost time apportionment not available

Question 33

are non-uk residents subject to CT on assets?

Answer 33

yes, only assets (e.g., shares) that derive at least 75% of their value from UK land and buildings (from 6Apr2019)

Question 34

base cost of assets/property disposed of by non-UK resident companies?

Answer 34

MV at 5Apr2019 alternatively, an election can be made to calculate the actual gain/loss using original cost time apportionment is not available