Capital Gains Tax Seminar

CGT Seminar
(Capital Gains Tax)
Presenter: Zee Shan

Content:
1. Introduction of the presenter;
2. When to complete CGT computation;
3. When not to complete CGT computation;
4. Calculation template;
5. Property transactions;
6. Shares transactions;
7. Reliefs;
8. Q & A
Presenter: Zee Shan

Zee Shan Bawany CTA ACCA MAAT
Leicester Regional Tax Manager
Smartfield Accountants

Education
Qualification Centre
CTA (Chartered Tax Adviser) BPP Birmingham
ACCA (Association of Chartered Certified Accountants) De Montfort Uni
ATT (Association of Tax Technicians) FTC Birmingham
C & G 7407 Teacher Training Leicester College
AAT (Association of Accounting Technicians) Leicester College
BTEC National Diploma in Computing Leicester College

Smartfield Limited Tax Manager
Abbey Tax Plc Tax Consultant
Smith Hannah Ltd Head of Personal Tax
Leicester College Tax Lecturer
Employment

Abbreviations
CGT = Capital Gains Tax
AE = Annual Exemption

CGT Supplementary Pages required if:
• you sold or disposed of chargeable assets which
were worth more than £44,000
• your chargeable gains before taking off any losses
were more than £11,000 (‘annual exempt amount’)
• you have gains in an earlier year taxable in
this period
• you want to claim an allowable capital loss or
make a capital gains claim or election for the year
• you were not domiciled in the UK and are
claiming to pay tax on your foreign gains on the
remittance basis
• you are chargeable on the remittance basis and
have remitted foreign chargeable gains of an
earlier year

CGT Supplementary Pages not required if you
only sell or dispose of:
• private cars
• personal possessions (chattels) worth up to £6,000 each, such as
jewellery, paintings or antiques;
• stocks and shares you hold in tax-free investment savings accounts, such
as ISAs and PEPs;
• UK Government or ‘gilt-edged’ securities, for example, National Savings
Certificates, Premium Bonds and loan stock issued by the Treasury;
• your main home, if you qualify for Private Residence Relief on the full
amount of the gain

Calculation template
£
Gross sales proceeds 100,000.00
Less: Incidental cost of disposal (500.00)
Net sales proceeds 99,500.00
less: Cost (50,000.00)
Less: Enhancement expenditure -
Gain before relief 49,500.00
Less: Relief(s) -
Gain after relief 49,500.00
Less: Annual Exemption (11,000.00)
Chargeable gain 38,500.00
CGT charged at 10, 18% or 28%

Investment property
Gains made on disposal of an
investment property are subject to
CGT.

Investment property
Example
Joan purchased a buy-to-let residential property
on 01/01/2006 for £50,000.
It was let out for the full period of ownership,
until it was sold on 31/12/2015
for £200,000.
Joan is a higher rate tax payer.

Investment property
Solution £
Less: Incidental cost of disposal -
less: Cost (50,000.00)
Less: Relief(s) -
Gain after relief 150,000.00
Less: Annual Exemption (11,000.00)
Chargeable gain 139,000.00
CGT charged 28% 38,920.00

Principal Private Residence
Private residence of an individual
qualifies for PPR (Principal Private
Residence) relief.

Periods Of Deemed Occupation
1. Living in job related accommodation;
2. Transfer of the marital home to spouse
following separation;
3. Delay in taking up residence;
4. Allowable absence;
5. Last 18 months.

Lettings Relief
If principal private residence is let out
before being sold then Lettings Relief
may be claimed.

Lettings Relief
Lettings relief is the lower of:
1. PPR
2. £40,000
3. Gain accrued during letting period

Lettings Relief
Example:
You let 60% of your house as residential accommodation and
occupied 40% as your home.
You made a gain of £60,000 when you disposed of the property.
You are entitled to Private Residence Relief for 40% of the gain –
£24,000. Your remaining gain is £36,000 and it all results from the
letting. The lowest of the three limits set out above is the amount
of Private Residence Relief and so you are entitled to additional
Letting Relief of £24,000.
Your chargeable gain will be £12,000.

Lettings Relief
Example:
John purchased his main residence on
01/01/2006 for £50,000.
He lived in it till 31/12/2012. Then it was
let out and eventually sold on 31/12/2015
for £200,000.

Lettings Relief
Solution:
From Till
Actual period of ownership 01/01/2006 31/12/2015 10 years
PPR Actual Occupation 01/01/2006 31/12/2012 7 years
PPR Deemed Occupation 01/07/2014 31/12/2015 1.5 years
Letting relief 01/01/2013 30/06/2014 1.5 years

£
Less: Incidental cost of disposal -
less: Cost (50,000.00)
Less: Relief(s) -
PPR £150,000 x 8.5 years / 10 years (127,500.00)
Lettings relief £150,000 x 1.5 years / 10 years (22,500.00)
Gain after relief -
Less: Annual Exemption -
Chargeable gain -
CGT charged at 10, 18% or 28%

Entrepreneurs’ Relief
Conditions to be met:
Unincorporated business
1. Sole trader or business partner
2. Owned the business for at least one year
before the sale date or closure of business
3. Dispose of business assets within 3 years
after selling or closing the business

Conditions to be met:
Incorporated business: Share Sale
1. Hold at least 5% of shares and voting rights in
the company
2. Employee or director of the company
3. Shares held for at least 1 year before sale
4. The company’s main activities are in trading
(rather than non-trading activities like investment)

Lifetime limit
£10 million

CGT Rate
10%

Example
You dispose of your manufacturing and retail
business which you had owned for the last eight
years. You make gains and losses on the business
assets as follows:
Factory premises £1,250,000
Goodwill £1,300,000
Retail shop loss (£500,000)

Solution
The gains and losses on the factory premises, the
goodwill and the shop are aggregated and will
together qualify for Entrepreneurs’ Relief which
will be due in respect of the net gain of
£2,050,000.

Example
You have been a partner with three other persons in a trading
business for several years.
Each partner had a 25% interest in the partnership’s assets.
On 31 December 2013 you retire and dispose of your 25%
interest in the assets of the business. You make gains of
£125,000 on the disposals of your 25% share of
the business goodwill and premises.

Solution
All of your gains will qualify for Entrepreneurs’ Relief
because you have disposed of the whole of your interest in
the assets of the partnership.

Example
You dispose of the shares you had owned for the last 20 years in a
company of which you were a director. You owned 20% of the shares
of the company that entitled you to 20% of the voting rights. You
made a gain of £860,000. The company had been a trading company
but its trade ceased one year before you sold the shares, therefore
the company ceased to qualify as a trading company.
Will you still be entitled to ER on the gain?

Solution
Your gain will still qualify for Entrepreneurs’ Relief
because the disposal was made less than three years after the
company ceased to qualify as a trading company.

Share dealing within an ISA Account
Gains made on share dealings within ISA account are exempt
from CGT.
Similarly losses are not allowable.

Gift of assets to charity
Gift of assets to UK registered charities
are exempt from CGT.

Gift of assets to charity
A gift or other bargain not made at arm's
length is treated as made on a no gain/no loss
basis if the disposal is to:
1. A charity or to a national heritage body
2. Housing organisation
3. Employee trust

Transfer of assets between husband
and wife
Transfer of assets between husband and
wife take place at No gain: No Loss.
The no gain/no loss rules in TCGA92 S58
do not apply to disposals taking place after
the end of the year of assessment in which
a married couple separated.

Gift of asset to family
Gift of assets to family members are subject to
CGT at MV (Market Value).
Consider the following taxes:
CGT - MV and ER
IHT - PET or CLT
SD - Exempt or not
VAT - Outside the scope of Vat or not
SD = Stamp Duty
PET = Potentially Exempt Transaction
CLT = Chargeable Lifetime Transaction

Gift of asset to family
Sometimes it is better to gift the assets
through a “will” instead of gifting them
during lifetime because at death CGT does
not apply.

Enterprise Investment Scheme (EIS)
There are two Capital Gains Tax reliefs within the EIS:
1. Disposal relief;
2. Deferral relief

1. Disposal relief
If disposal relief is due you will not have to pay Capital Gains Tax on a gain
on your disposal of the EIS shares. The following conditions have to be met:
• you must have held the EIS shares for at least three years (note that if you
acquired EIS shares in a company which did not start to trade until a later
date, the three years do not start until that later date)
• you must have received Income Tax relief in full on the whole of your
subscription(s) for the EIS shares and none of the Income Tax relief must
have been withdrawn.

1. Disposal relief
Relief withdrawn
CGT disposal relief will not apply if shares are sold within 3 years.

2. Deferral relief
When you dispose of an asset and make a gain you usually pay Capital Gains
Tax for the tax year in which you dispose of the asset.
Deferral relief lets you treat the gain as not arising until some future date if
you acquire EIS shares.
If you make a claim to defer a gain, the gain may be charged to Capital Gains
Tax in a later tax year, usually when you dispose of the EIS shares. If you get
Income Tax relief on an acquisition of shares, then you can claim deferral
relief as well.
You do not have to get Income Tax relief to claim deferral relief. To get full
deferral relief you must invest an amount at least equal to the chargeable
gain.

2. Deferral relief
When is the deferred gain revived?
The whole (or part) of the deferred gain is revived when there is a chargeable
event, unless you die before a chargeable event occurs. There is a chargeable
event if:
• you dispose of your EIS shares (unless the disposal is to your spouse or
civil partner whilst living together, in which case the event occurs when
that person disposes of the shares)
• you (or your spouse or civil partner to whom you have transferred your
shares) cease to be resident in the UK, if this happens within three years
from the time the shares were issued. But this does not apply if whichever
of you holds the shares takes up employment outside the UK and becomes
resident again within three years, without disposing of any of the shares in
the meantime
• the shares cease or are treated as ceasing to be eligible shares, for example,
because the company is prevented from being a qualifying company.

Seed Enterprise Investment Scheme
(SEIS)
There are two Capital Gains Tax reliefs within the SEIS:
1. Reinvestment relief;
2. Deferral relief

Seed Enterprise Investment Scheme (SEIS)
1. Reinvestment relief
When you dispose of an asset and make a gain you usually pay
Capital Gains Tax for the tax year in which you dispose of the
asset. Reinvestment relief lets you treat 50% of a gain arising in
2013–14 as exempt from Capital Gains Tax if you acquire SEIS
shares.
If you get SEIS Income Tax relief on an acquisition of shares, then
you can claim reinvestment relief as well. You cannot get
reinvestment relief unless you also get SEIS Income Tax relief. To
get full reinvestment relief you must invest in SEIS shares an
amount at least equal to the chargeable gain. See the
Capital gains summary notes. If you invest less, reinvestment
relief is limited to half the amount invested.

2. Disposal relief
If disposal relief is due you will not have to pay Capital Gains
Tax on a gain on your disposal of SEIS shares. The following
conditions have to be met.
• You must have held the SEIS shares for at least three years.
SEIS shares cannot be acquired before 2012–13 so disposal
relief will not apply to any disposals before 6 April 2015.
• You must have received SEIS Income Tax relief in full on the
whole of your subscription for the SEIS shares and none of the
Income Tax relief must have been withdrawn.

Can you claim a loss?
If you make a loss on a disposal of your SEIS shares at any
time you can set this loss against your chargeable gains. In
computing the loss, you must reduce the cost of your shares
by the amount of any Income Tax relief given and not
withdrawn.

Venture capital trusts (VCT)
Only disposal relief is available.

Venture capital trusts (VCT)
What is disposal relief?
If disposal relief is due, you will not have to pay Capital Gains Tax on any
gain you make on the disposal of VCT shares. The following conditions have
to be met:
• relief is limited to acquisitions not exceeding £200,000 worth of VCT
shares in any one tax year
• you are an individual (not a trustee)
• you are 18 or over at the date of disposal
• the company was an approved VCT both when you acquired the shares
and when you disposed of them
• you acquired the shares for commercial reasons and not as part of a tax
avoidance scheme.

Holdover Relief
Hold-over relief may be claimed for:
• gifts of business assets
• gifts of unlisted shares in trading
companies etc.
• gifts of agricultural land
• gifts which are chargeable transfers for
Inheritance Tax purposes

Holdover Relief
How to claim hold-over relief?
Except where the claim is about a transfer
to the trustees of a settlement,
the transferor and the transferee must
claim jointly. In the case of a transfer
to the trustees of a settlement, the claim
is made by the transferor only.

Business Asset Rollover Relief
Business Asset Rollover Relief lets you defer
any Capital Gains Tax due when you dispose of
certain assets (called ‘old assets’). If you
acquire other assets (called ‘new assets’)
costing the same as, or more than, the amount
you got when you disposed of the old assets,
the relief allows you to postpone paying tax
until you dispose of those new assets.

Reinvestment time limit
Up to 1 year before or
3 years after the disposal of old asset.

What is the claim time limit?
Within 4 years after the end of the tax
year.

Qualifying assets
Both the old assets you’ve disposed of and the new ones you’ve acquired
must be:
1. Interests in buildings or parts of buildings
2. Interests in land
3. Fixed plant or machinery
4. Ships, aircraft, hovercraft, satellites, space stations and spacecraft
5. Goodwill
6. Milk, potato or ewe and suckler cow premium quotas
7. Fish quotas
8. Payment entitlements under the single payment scheme or basic
payment scheme
9. Lloyd’s syndicate capacities

Depreciating assets
If the new assets are depreciating assets you’ll get relief by a
different method. Instead of your tax being deferred until you
dispose of the new assets, it will be deferred until the earliest of
the following:
1. when you dispose of the new assets
2. when you cease to use the new assets in your trade
3. 10 years from when you acquired the new assets
A depreciating asset is any fixed plant or machinery or any asset
which will have a life of 60 years or less from when you acquired it.

Example
You sell a shop and use the proceeds to buy
fixed plant and machinery on 1 June 2014.
You can claim to defer the gain on the shop
until the earliest of:
1. the date you sell the plant and machinery
2. the date you stop using the plant and machinery in your trade
3. 01-Jun-24

Losses on loans to traders
If an individual lends money to his company
by way of DLA (Director’s Loan Account) and
that company becomes insolvent. Then the
amount outstanding as DLA can be claimed as
a capital loss.

Capital Loss Relief
Capital loss can only be offset against capital gains of current year
or future years.
Subscriber share loss can be offset against revenue income.

Capital Loss Relief
Planning point
if a client wish to sell two rental properties.
One in each tax year to release equity for retirement.
One property is expected to make a potential capital loss and the
other is expected to make potential capital gain.
Then you should advise the client to sell the property with the
accrued loss first, so it may be relieved in the following year
against the gain on the other property.

Please see me after the event to add your
e-mail address on DropBox shared folder.
Please do not send me an e-mail to request
slides after the event.
Copy of slides

HMRC Agent Dedicated Helpline
0300 200 33 11
or
Become a client of Smartfield.
Call us on 0116 2 98 58 48
Help & Advice

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Reviews
on
Smartfield’s
Services

Dr Borislav Boychev (Radiologist)
I am very much impressed from my business meeting with
Mr. Zee Shan Bawany. I had to discuss some tax issues
regarding my limited company with him and he answered to
all my questions with a lot of professionalism and patience.
He is a very helpful, honest and reliable person. I highly
recommend him. Many, many thanks!
Reviews on Smartfield

Zahid Sardar (IT Contractor)
Fantastic support, amazing services, brilliant advice, extremely friendly and
helpful, and all for a great price!! I was looking to set up my limited company and
I spoke to a number of different accountants but I settled with Smartfield
Accountants after being recommended them by a friend and after speaking
directly with Zeeshan and seeing just how easy it was communicating with him
and how well he explained everything. He took me through the entire process of
setting up and registering my company, registering for taxes and VAT, etc, and he
was always there, at the other end of the phone, to answer each and all of my
queries that I had. Being new to all of this, Zeeshan was extremely helpful,
patient and friendly in explaining all the small details and taking me through all
the options available to me. His advice was always unbiased and aimed at what is
most beneficial for me and my business as opposed to his own and I really
appreciated that. I am really glad to have been recommended Smartfield
Accountants and to be working with them. I would very highly recommend them
for all of your accounting and tax service needs.

Dr Muhammad Shahbaz Sharif (GP)
I am a Doctor working as a GP in Leicester. I needed
an accountant in Leicester and came across Zee
Shan. I am very impressed and happy with the
service I received. He was clear, concise and to the
point. Didn't waste my time with fancy jargon. Got
my work done very professionally. I would
recommend him without any reservations.

Dr Venu Gopal (A&E Doctor)
I visited quite a few accountants but most of them struggled
to answer my queries and said they will find out and let me
know. But Zeeshan gave simple, clear straight answers and
everything is on his tips. Very knowledgeable, friendly and
very professional guy. I would recommend to anyone without
a doubt. Normally I think twice before joining an accountant
but after the initial meeting with Zeeshan I felt like joining
immediately. Hope this is helpful.

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