Category: Capital Gains Tax

In most cases, there is no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes effectively at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold, the gain or loss will be calculated from when the asset was first owned by the original spouse or civil partner.

There are a few exceptions that couples should be aware of where the relief does not apply. This mainly relates to the use of goods which are sold on by the transferee’s business and for couples that were separated and not living together for the entire tax year when the assets were transferred. Spouses or civil partners that lived together at any point in the tax year when the assets were transferred can still benefit from these rules. If a transfer did not qualify then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.

There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than was paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.

Business Asset Rollover Relief (BADR) is the renamed Entrepreneurs’ Relief. The name change does not affect the operation of the relief. BADR applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. Where this relief is available CGT of 10% is payable in place of the standard rate. There are a number of qualifying conditions that must be met in order to qualify for the relief.

You can currently claim a total of £1 million in BADR over your lifetime. The £1m lifetime limit means you can qualify for the relief more than once. The lifetime limit may be higher if you sold assets before 11 March 2020.

One of the categories for claiming BADR concerns assets owned by the seller personally but that are used in a business carried on by either:

1. a partnership of which they are a member, or
2. by their personal trading company in which the seller is an officer or employee.

The disposal will only qualify as long as it’s associated with a qualifying disposal of either the sellers’ interest in the partnership or of shares or securities in the company.

BADR on the sale of an associated asset where say a property owner received full market rent from his company for use of the property, may restrict entitlement to BADR. Directors with commercial property often pay themselves a full market rent for use of the property as there is no NIC charge, but they may not have considered the loss of BADR when the property is subsequently sold. 

Claims for BADR are made either through the taxpayers Self-Assessment tax return or by filling in Section A of the Business Asset Disposal Relief help sheet. The deadline for claiming relief for the 2020-21 tax year is 31 January 2023.

The deadline for paying any Capital Gains Tax (CGT) due on the sale of a residential property is now 60 days. The previous 30-day limit was replaced as part of the Autumn Budget measures in October and the change came into effect on the day of the announcement (27 October 2021).

This means that a CGT return needs to be completed and a payment on account of any CGT due should be made within 60 days of the completion of the transaction. This applies to UK residents selling UK residential property where CGT is due.

In practice, this change only applies to the sale of any residential property that does not qualify for Private Residence Relief (PRR). The PRR relief applies to qualifying residential properly used wholly as a main family residence. 

HMRC has listed the following types of property sales that are affected:

• a property that you have not used as your main home;
• a holiday home;
• a property which you let out for people to live in;
• a property that you’ve inherited and have not used as your main home.

There can be penalties and interest if any CGT due on the sale of a UK property is not paid within the stated 60-day time limit. There are separate rules for non-UK residents.

Business Asset Roll-over Relief is a valuable relief that allows the deferral of Capital Gains Tax (CGT) on gains made when taxpayers sell or dispose of certain assets and use all or part of the proceeds to buy new business assets. The relief means that the tax on the gain of the old asset is postponed. The amount of the gain is effectively rolled over into the cost of the new asset and any CGT liability is deferred until the new asset is sold.

Where only part of the proceeds from the sale of the old asset is used to buy a new asset a partial rollover claim can be made. It is also possible to claim for provisional rollover relief where the taxpayer expects to buy new assets but haven’t done so yet. Interestingly, rollover relief can also be claimed if taxpayers use the proceeds from the sale of the old asset to improve assets, they already own. The total amount of rollover relief is dependent on the total amount reinvested to purchase new assets.

There are qualifying conditions to be met to ensure entitlement to this relief. This includes ensuring that new assets are purchased within 3 years of selling or disposing of the old ones (or up to one year before). Under certain circumstances, HMRC has the discretion to extend these time limits. In addition, both the old and new assets must be used by your business and the business must be trading when you sell the old assets and buy the new ones. Taxpayers must claim relief within 4 years of the end of the tax year when they bought the new asset (or sold the old one, if that happened after).

There is a Capital Gains Tax (CGT) charge when an individual sells a residential property in the UK. This tax is supposed to be paid with 30 days of the completion date.

There is a recent change in the legislation on reporting and payment date.

In the Autumn Budget, the Chancellor announced that the deadline for making CGT returns and associated payments on account would be changed from 30 days after completion to 60 days with immediate effect. https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

In practice, this change only applies to the sale of any residential property that does not qualify for Private Residence Relief (PRR). The PRR relief applies to qualifying residential properly used wholly as a main family residence.

Have a look at our Capital Gains Tax Services.

HMRC has listed the following types of property sales that are affected:

• a property that you have not used as your main home;
• a holiday home;
• a property which you let out for people to live in;
• a property that you’ve inherited and have not used as your main home.

There can be penalties and interest if any CGT due on the sale of a UK property is not paid within the stated 60-day time limit. Relevant disposals that completed before 27 October 2021 remain subject to the 30-day deadline.

Please book a free consultation with us if you are looking to know more about the impact of change.

Gift Hold-Over Relief is effectively a deferral of Capital Gains Tax (CGT) when assets are given away (including certain shares) or sold for less than they are worth to help benefit the buyer. The relief means that any gain on the asset is 'Held-Over' until the recipient of the gift sells or disposes of them. This is done by reducing the donee's acquisition cost by the amount of the held-over gain.

The person gifting a qualifying asset is not subject to CGT on the gift. However, CGT may be payable where the asset is sold for less than it’s worth. Gifts between spouses and civil partners do not trigger capital gains. A claim for the relief must be made jointly with the person to whom the gift was made.

If you are giving away business assets you must:

• be a sole trader or business partner, or have at least 5% of voting rights in a company (known as your 'personal company')
• use the assets in your business or personal company

You can usually get partial relief if you used the assets partly for your business.

If you are giving away shares, then the shares must be in a company that's either:

• not listed on any recognised stock exchange
• your personal company

The company's main activities must be in trading, for example providing goods or services, rather than non-trading activities like investment.

In most cases, there is no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes effectively at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold, the gain or loss will be calculated based on the original cost when the asset was first owned by the spouse or civil partner.

There are a few exceptions that couples should be aware of when the relief does not apply. This relates to the use of goods which are sold on by the transferee’s business and for couples that were separated and not living together for the entire tax year when the assets were transferred. Spouses or civil partners that lived together at any point in the tax year when the assets were transferred can still benefit from these rules. If a transfer did not qualify then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.

There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than was paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.

Capital Gains Tax (CGT) is normally charged at a flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT.

A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). The rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers. Again, if the gain pushes a taxpayer into the higher rate, then CGT will be payable at both rates.

The usual due date for paying any CGT owed to HMRC is the 31 January following the end of the tax year in which the capital gain was made. However, since April 2020, any CGT due on the sale of a residential property needs to be paid within 30 days. In practice, this change only applies to the sale of residential property that does not qualify for Private Residence Relief (PRR).

There is also an annual CGT exemption for individuals that is currently £12,300. A husband and wife each have a separate exemption. Same-sex couples who acquire a legal status as civil partners are treated in the same way as married couples for CGT purposes.

If you are looking to know more Capital gains tax (CGT), please contact us.

The Capital Gains Tax (CGT) reporting and payment date for UK residents that sell a residential property changed with effect from 6 April 2020. This change means that any CGT due on the sale of a residential property now needs to be reported and a payment on account of any CGT due made within 30 days of the completion of the transaction.

In practice, this change only applies to the sale of a residential property that does not qualify for Private Residence Relief (PRR). The PRR relief applies to qualifying residential property used wholly as a main family residence. 

HMRC has listed the following types of property sales that are affected:

• a property that you have not used as your main home;
• a holiday home;
• a property which you let out for people to live in;
• a property that you have inherited and have not used as your main home.

There can be penalties and interest charged if CGT due on the sale of a UK property is not paid within 30 days of the sale. 

There are various methods at your disposal to reduce or delay the amount of Capital Gains Tax (CGT) when you sell a property that has been used for business purposes.

For example, Business Asset Rollover Relief allows for deferral of CGT on gains made when taxpayers sell or dispose of certain assets (including property) and uses all or part of the proceeds to buy new business assets. The relief means that the tax due on the gain of the property that has been sold is postponed. The amount of the gain is effectively rolled over into the cost of the new asset and any CGT liability is deferred until the new asset is sold. There are qualifying conditions that must be met to ensure entitlement to any relief.

If the main purpose of the business concerns buying and selling property, for example a property development or property trading business, then the business is not liable to CGT when a property is sold.  Instead, properties sold under the name of a Limited company will be liable to Corporation Tax and properties sold under the name of a sole trader or partner will be liable to Income Tax. 

There are also special rules for limited companies that dispose of UK residential dwellings valued at over £500,000 and which are held in a ‘corporate envelope’ (e.g., a company). Qualifying gains made after 6 April 2019 are liable to Corporation Tax.