CTA IND 42 - 54

Question 1

Individuals resident in the UK are chargeable to CGT on disposals of….

Answer 1

Worldwide assets

Question 2

Non-UK resident are chargeable in respect of …

Answer 2

disposals of UK land

Question 3

The concept of a disposal includes:

Answer 3

1. sales
2. gifts
3. loss/destruction

Question 4

The 10 main exempt assets are:

Answer 4

1. Cars
2. Decorations for valour
3. EIS and SEIS shares
4. Foreign currency
5. Foreign currency bank accounts
6. Gilts
7. Qualifying corporate bonds
8. Shares in an ISA
9. Wasting chattels (under 50 yrs)
10. Chattels (bought and sold for under £6k)

Question 5

What costs are deductible for calculating CGT gains?

Answer 5

Costs of disposal:
1. Legal fees
2. Advertising

Associated costs of acquisition:
3. Legal fees
4. SDLT

Enhancement expenditure

Question 6

How to qualify for BADR?

Answer 6

Either:
1. Sole trader / partner selling whole or part of their business or

2. Company directors/employees selling shares (or securities) in their ‘personal trading company’

*personal trading company = 5% share capital, voting rights etc

**Business / shares owned at least two years prior

Question 7

When must a BADR / IR claim be made by?

Answer 7

On or before the first anniversary of the 31 January following the tax year of disposal

Question 8

Other disposals qualifying for BADR?

Answer 8

1. Asset used in business when it ceases, if it was owned and used by business for 2 years prior to cessation
2. Shares in a company which has ceased trading (own for 2 yrs prior and sell within 3 years after)

Question 9

What is an associated disposal qualifying for BADR?

Answer 9

Taxpayer:
-Makes material disposal

-Owns asset used by company

-sells asset in conjunction with disposal.

(must been used for 2 yrs prior and owned for 3 yrs prior)

Question 10

BADR lifetime limit

IR lifetime limit

Answer 10

£1 million

£10 million

(per person)

Question 11

Conditions for IR :

Answer 11

1. Trading company and UNLISTED when issued
2. Ordinary shares subscribed for cash on or after 17 March 2016
3. Cannot be director or employee
4. Shares held for three years

Question 12

What happens if there is a mix of qualifying shares, potentially qualifying shares and excluded shares?

Answer 12

Only the proportion of the gain relating to qualifying shares can get IR

Question 13

Current year capital losses are offset against current year capital gains…

When losses are b/f

Answer 13

before the AEA. The full current year loss must be used.

Use the AEA first

Question 14

Capital losses on qualifying trading company shares (inc EIS and SEIS) can be used either as capital losses or…

Answer 14

set against net income of the current or preceding year

Question 15

If you make a sale to a connected person, you can only use the loss …

Answer 15

against future gains made on sale to the SAME connected person

Question 16

UK residents must report taxable gains on disposals of UK residential property via…

It is due …

Answer 16

an online property return

within 60 days of the completion of the disposal

*no return needed if no CGT payable

** payment on account of the CGT must be made also within 60 days (best estimate)

***payment on account is deducted from CGT due for the year

**balance payable by following 31 January

Question 17

How to report and pay CGT on non residential assets?

Answer 17

Self assessment tax return

CGT on gains due no later than 31 January following the tax year (no payments on account)

Question 18

When a taxpayer makes a part disposal, only a proportion of the original cost should be used in calculating the gain.

The allowable cost is:

Answer 18

A/(A+B) x acquisition cost

A= gross proceeds
B=value of part retained

*Base cost of asset retained is reduced by cost used in part disposal calculation

Question 19

The long lease of an asset is a ?

Answer 19

Normal CGT computation

Question 20

The short lease (under 50 yrs) of an asset is ?

Answer 20

Normal CGT comp BUT

cost = original cost x S/P

S=% for years left at sale
P=% for years left at purchase

*The lease %s are in the tax tables

Question 21

If chattel cost over £6k but sold for less than £6k we….

Answer 21

Restrict the loss by deeming gross proceeds to be £6k

Question 22

If a chattel cost under £6k but sold for over £6k we ….

Answer 22

Restrict the gain to:

5/3 x (Gross proceeds - 6,000)

Question 23

Connected persons include:

Answer 23

1. Spouses
2. Relatives
3. Relatives of spouse
4. Spouse of relatives
5. Company you control
6. Trustees of a trust you set up

*proceeds for CGT to connected persons must be at MV

Question 24

The share matching rules for individuals are:

Answer 24

1. Same day
2. 30 days
3. All other (s.104 pool)

Question 25

Are 'share for share' exchanges a disposal for CGT?

Answer 25

NO

Question 26

What happens when cash is received on a takeover?

Answer 26

A gain will arise and will be taxed immediately using the part disposal rules. *Any remaining original cost not allocated to cash part disposal must be the base cost of the shares received at takeover