Are your clients familiar with the various exemptions and reliefs available on CGT transactions?
Capital gains tax (CGT) is charged when there is a chargeable disposal of a chargeable asset by a chargeable person.
All forms of property are chargeable assets unless exempt. Below are some of the exemptions and reliefs provided by TCGA 1992.
Wasting assets (s45): subject to certain exemptions, no chargeable gain shall accrue on the disposal of, or of an interest in, an asset which is tangible movable property, and which is a wasting asset. A wasting asset means an asset with a useful life not exceeding 50 years. Useful life is determined at the date of acquisition, having regard to the purpose for which the asset was obtained.
One instance when wasting assets are not exempt from capital gains tax is when the wasting chattels are used in trade, and capital allowances have been claimed or could have been claimed on them (s47). There would therefore be two potential tax liabilities arising on the sale of business machinery at a gain: the first as a balancing charge, and the second in the form of tax on the chargeable gain. Any tax allowable loss arising on the sale of business plant and machinery is reduced to take account of relief given by capital allowances.
Chattels (s262): a gain accruing on a disposal of tangible movable property is not a chargeable gain if the amount of the consideration for the disposal does not exceed £6,000.
Winnings from betting (s51) and sums obtained by way of compensation or damages for any wrong or injury suffered by an individual in his person or in his profession or vocation are not chargeable gains.
Disposal of private residence s222 provides relief for all or part of a gain accruing to an individual attributable to the disposal of a dwelling house which has been the individual’s only or main residence at some time in the period of ownership.
Seed enterprise investment scheme (SEIS) (s150 E) and Enterprise investment scheme (EIS) Gains accruing on the disposal after the end of the ‘relevant period’ of shares for which income tax relief under the SEIS or EIS regime has been given (and not withdrawn) are not chargeable. Special rules apply to losses on disposal of such shares.
Venture capital trusts: subject to certain conditions, gains on a ‘qualifying disposal’ of ordinary shares in a venture capital trust is not a chargeable gain. Special rules apply to losses on disposal of such shares.
Gilt-edged securities and qualifying corporate bonds (QCBs) (s115): a gain accruing on a disposal of government-issued securities known as gilts or any QCB are not chargeable gains. The list of gilt-edged securities which have a redemption date on or after 1 January 1992, disposals of which are exempt from tax on chargeable gains under section 115 of the Taxation of Chargeable Gains Act 1992, can be found here.
Pension funds, purchased annuities, and superannuation funds (s237) No chargeable gain accrues on the disposal of a right to, or to any part of, any allowance, annuity or capital sum payable out of any superannuation fund, or under any superannuation scheme, established solely or mainly for persons employed in a profession, trade, undertaking or employment, and their dependants. The exemption covers the disposal of rights to payments under purchased annuities or covenants not secured on property.
Woodlands (s250): consideration for a disposal of trees (standing or felled or cut on woodlands managed by the occupier on a commercial basis) shall be excluded from the computation of the gain if the person making the disposal is the occupier. This also covers capital sums received under a policy of insurance in respect of the destruction of or damage or injury to trees by fire or other hazard if the person making the disposal is the occupier.
Cars (s263) a mechanically propelled road vehicle constructed or adapted for the carriage of passengers, except for a vehicle of a type not commonly used as a private vehicle, shall not be a chargeable asset; and accordingly no chargeable gain or allowable loss shall accrue on its disposal.
Decorations for valour or gallant conduct (s268): a gain accruing on the disposal by any person of a decoration awarded for valour or gallant conduct which he acquired otherwise than for consideration in money or money’s worth shall not be a chargeable gain.
Foreign currency for personal expenditure(s269): a gain accruing on the disposal by an individual of a foreign currency acquired by him or his family for personal expenditure outside the United Kingdom is not a chargeable gain.