Summary
Summary Tax notes for Business Law and Practice- SQE 1
- Course
- Institution
Tax notes for Business Law and Practice- SQE 1
[Show more]
Seller
Follow
demidarbey1
Content preview
CAPITAL GAINS TAXChargeable Person?
- Individuals
- Personal representatives, when they dispose of the assets of the deceased person;
- Partners, when the partners dispose of a chargeable asset. Each partner is charged
separately for their proportion of the gain; and
- Trustees, on the disposal of a chargeable asset from a trust fund
Companies do not pay capital gains tax, they pay corporation tax.
Charities are exempt from paying CGT.
Chargeable Asset?
Under TCGA 1992, a chargeable asset includes all forms of property, including debts,
options and incorporeal property (e.g. a patent or a lease, a legal right in property having no
physical existence).
It does not include sterling.
Steps to calculate CGT:
Step 1: Disposal of a chargeable asset
- Identify the disposal asset
Step 2: Calculation of the gain
- Assets sale price less its purchase price
Step 3: Consider Reliefs
Step 4: Aggregate Gains/Losses; deduct annual exemption
- Gains and losses are added together and the annual exemption of £12,300.00 is
deducted
Step 5: Apply the correct rate of tax
- There are 4 rates and capital gains is treated as if it were the top slice of the taxpayer’s
income for tax year.
- The following rates apply to any gains other than resi property or gains which do not
qualify for business asset disposal relief:
o If the taxpayers capital gains and taxable income added together do not exceed
the threshold for basic rate income tax (£37,700), the rate of ta payable on the
gains is 10%
o If the taxpayer’s capitals gains and taxable income added together exceed the
basic rate threshold, the rate of tax for any gains up to the basic rate threshold
is 10% and any gains which exceed the basic rate threshold are taxed at a rate
of 20%
Tax Rate for Residential Property
- If the chargeable asset is residential property which is not the taxpayer’s main
residence, the gains are subject to a surcharge of 8%
, o This means that any gains which are below the basic rate threshold are taxed at
18% and any gains which exceed the basic rate threshold are taxed at 28%
Tax Rate for business asset disposal relief
- Any gains which qualify for business asset disposal relief are taxed at 10% regardless
of the taxpayers income.
Tax Rate for Trustees and PRs
- Gains made by trustees and PRs are all taxed at 20% or for residential property, 28%
STEP 1: DISPOSAL (SALE OR GIFT) OF A CHARGEABLE ASSET
The disposal can be a sale or a gift, if it is a gift, then HMRC will use the market value of the
asset at the time of the gift, instead of consideration received, to calculate the gain.
Disposal of part?
, - Even if the taxpayer only sells or gives away part of an asset, it is still chargeable to
CGT
Death of taxpayer?
- When someone dies there is no disposal so no CGT.
- The PRs are deemed to acquire the deceased’s assets at market value at the date of
death.
STEP 2: CALCULATE THE GAIN
Start with the consideration for the sale (or market value) and subtract any of the following
expenditure incurred by the tax payer.
Initial expenditure:
- The cost price of the asset (or its market value or probate value if it’s a give or
inherited)
- Any incidental costs of acquisition and
- Any expenditure wholly or exclusively incurred in providing the asset
Subsequent Expenditure
- Expenditure wholly and exclusively incurred in establishing, preserving or defending
title to the asset
- Expenditure wholly and exclusively incurred to enhance the value of the asset, which
is reflected in the value of the asset at the time of disposal.
Incidental Costs of Disposal
- These include legal fees for the sale and the estate agents fees or commission
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller demidarbey1. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.31. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75632 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now