1. BTAX Business Taxation
Session 7: CGT

2. Topics Chargeable gains and exemptions Calculate gains and CGT Losses
Part disposals, chattels, shares
Reliefs (Entrepreneurs, Rollover, Gift)
Administration of CGT 2

3. Chargeable Disposals of Assets
Sell
Give away
Lose
Destroy 3

4. Exempt Gains
In what circumstances are gain exempt from CGT?

5. Exempt Assets for businesses
Trading stock
Chattels bought and sold for less than £6,000
Cars
Government Securities or Gilts
Animals

6. Connected person
Who is a connected person?

7. Connected person
What is different about gains when selling to a connected person

8. Calculate Gain Proceeds - Costs of disposal =Net proceeds
- Original cost (+ incidental costs)
- Improvements
= Gain

9. Calculate CGT Total gains for year - Annual exemption
= Gains subject to CGT
10% or 18%
+ 20% or 18%
= CGT

10. Capital losses
How do you deal with capital losses?

11. Calculate CGT with losses
Total gains for year
- Losses for year
- Annual exemption
- Losses b/f
= Gains subject to CGT
10% or 18%
+ 20% or 28%
= CGT

12. Calculate CGT: mixed gains
RESIDENTIAL OTHER TOTAL
Total gains for year X X
- Losses for year (X) (X)
- Annual exemption (X) (X)
- Losses b/f (X) (X)
= Gains subject to CGT X X
18%/10% X X
+ 28%/20% X X
= CGT X
Question 7.1

13. Issues in common with companies
Links with Capital Allowances
Improvement expenditure
Chattels rules
Part disposals
Rollover Relief

14. Part-disposal
How do you calculate the cost? 14

15. Chattels: How do you calculate the gain?
Bought & sold for <£6,000
Bought for >£6,000 sold for <£6,000
Otherwise

16. Shares: match sale to purchase
What is the priority?
Remember: No Indexation Allowance

17. Disposal of a business
Each individual asset is considered as a separate chargeable event
Non current asset disposals need to be considered according to usual rules
Goodwill is a chargeable asset

18. Rollover Relief Available for Companies and Individual businesses
Applies when one business asset is sold and another is purchased
Defers or postpones the gain until new asset is sold
Gain can be deferred with each sale if rules complied with
CGT-shares

19. Rules: category of assets
Land & buildings
Immovable plant & machinery
Ships, Aircraft, Hovercraft
Milk and fish quotas
Space craft
CGT-shares

20. Rules
New asset must be purchased within three years after sale of old asset or one year before
New asset must be brought into use by business
CGT-shares

21. Partial reinvestment
What if only part of the proceeds is spent on the new asset?
Full gain can be deferred if all proceeds invested in new asset
If partial reinvestment, then amount not reinvested becomes immediately chargeable
Question 7.2
Example page 4.24
Students try M Ltd
Students try D Ltd
Students try 4.5 page 4.29
CGT-shares

22. Gift Relief : Individuals only
Applies when an individual gives away business assets to connected party
Disposal proceeds will be deemed to be at market value
Election must be made by both parties
Also applies to sales at undervalue

23. Gift Relief Donor does not have a CGT liability
Gain on gift deducted from base cost of asset for recipient
Gain will emerge when recipient sells asset
Questions 7.4
Page 8.17 Jan Nice
Handout questions 7,8,9
Students 8.4

24. Entrepreneur’s Relief
On disposal of all or part of a trading business OR
Disposal in shares of a personal trading company.
Charged at rate of 10% (not 18% or 28%)
Lifetime limit £10,000,000
Excludes goodwill on incorporation
Questions 7.5
Example Dunn Trading page 8.15
Students 8.2 & 8.5

25. Administration of CGT
Payment date: by 31st January following end of tax year
No POA
Retain all relevant records on assets held while still retain assets
On disposal of assets, retain records for 5 years after deadline for submission of tax return
If deferral reliefs claimed, retain records until all assets disposed of

26. Homework
Tutorial book questions 8.2, 8.3, 8.4, 8.5, 8.1, 8.6, 8.7, 8.8
Make notes from chapter 8