Capital Gains Tax
1. Introduction to Capital Gains Tax <Answer> Capital Gains Tax applies in
certain cir- cumstances to individuals who dispose of capital assets that they
have previously acquired. It often applies to the sale or gift of an asset that may
have been owned for quite some time. This can result in what is called a
'chargeable gain'.
CGT does not apply to trading assets, where items are regularly bought and sold to
make a profit, as these are not classed as capital assets.
2. Basis of Assessment <Answer> CGT is applied to individuals by using the
same tax years as those used for income.
The basis of assessment is the chargeable gains less capital losses arising from
disposals that occur during the tax year.
The tax is based on the total of gains that have occurred, and a gain can only arise
when a disposal has taken place.
3. Disposals <Answer> A disposal arises when an asset is;
- Sold (or part of it is sold), or
- Given away, or
- Lost, or
- Destroyed
In the case of loss and destruction, the value of the asset is most likely to be
assessed as zero, unless insurance proceeds are received.
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15
, Two special situations where disposals do not give rise to CGT are;
- Disposals arising because the owner has died, and
- Any disposals between spouses or civil partners
4. Chargeable and Exempt Assets <Answer> For CGT to arise, the asset that
has been disposed of must be a 'chargeable' asset. Exempt assets are entirely
outside the CGT system.
The simple rule is that if an asset is not exempt, then it must be chargeable.
5. Exempt Assets <Answer> The main exempt assets include;
- Principle private residence - an individual's home
- Cars
- Wasting chattels (chattels are tangible, movable assets, ie the majority or personal
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15
1. Introduction to Capital Gains Tax <Answer> Capital Gains Tax applies in
certain cir- cumstances to individuals who dispose of capital assets that they
have previously acquired. It often applies to the sale or gift of an asset that may
have been owned for quite some time. This can result in what is called a
'chargeable gain'.
CGT does not apply to trading assets, where items are regularly bought and sold to
make a profit, as these are not classed as capital assets.
2. Basis of Assessment <Answer> CGT is applied to individuals by using the
same tax years as those used for income.
The basis of assessment is the chargeable gains less capital losses arising from
disposals that occur during the tax year.
The tax is based on the total of gains that have occurred, and a gain can only arise
when a disposal has taken place.
3. Disposals <Answer> A disposal arises when an asset is;
- Sold (or part of it is sold), or
- Given away, or
- Lost, or
- Destroyed
In the case of loss and destruction, the value of the asset is most likely to be
assessed as zero, unless insurance proceeds are received.
1/
15
, Two special situations where disposals do not give rise to CGT are;
- Disposals arising because the owner has died, and
- Any disposals between spouses or civil partners
4. Chargeable and Exempt Assets <Answer> For CGT to arise, the asset that
has been disposed of must be a 'chargeable' asset. Exempt assets are entirely
outside the CGT system.
The simple rule is that if an asset is not exempt, then it must be chargeable.
5. Exempt Assets <Answer> The main exempt assets include;
- Principle private residence - an individual's home
- Cars
- Wasting chattels (chattels are tangible, movable assets, ie the majority or personal
2/
15
