TAX LECTURE 5
CHARGEABLE PERSONS
Individuals resident in the UK
but also non-residents for certain disposals of land
MAIN EXEMPT ASSETS
Tangible moveable property (chattels) sold for less than £6,000
Principal private residences
Assets in an ISA
Gambling winnings
National Savings Certificates and Premium Bonds
Foreign currency
Compensation for injury
Motor Cars
CHARGEABLE DISPOSALS
Usually the chargeable disposal is a sale of the asset
Includes:
Part disposals
Gifts
(treated as a sale at market value)
Loss/destruction
Receipt of a capital sum derived from an asset
GIFTS
A gift is a disposal for CGT purposes
Proceeds are deemed to be market value
Donee’s acquisition cost is also market value
NON-CHARGEABLE DISPOSALS
Gifts to charities and certain other bodies (e.g. art galleries and museums)
Disposals caused by the death of the taxpayer
NB. Disposals between husband and wife are chargeable but are deemed to occur at a value
which results in neither a gain nor a loss i.e. at cost price
CALCULATION OF GAIN
Disposal price less purchase price
Deduct incidental costs of purchase and sale
o e.g. solicitors’ fees, auction fees
Deduct enhancement expenditure
o but not repairs
, LAYOUT OF A COMPUTATION
Disposal Value xxx
Less: Incidental cost of disposal (x)
xxx
Less
Acquisition cost xxx
Incidental cost of acquisition xxx
Enhancement expenditure xxx
Cost of defending title xxx
Valuation fees xxx (xxx)
Chargeable gain or loss xxx
ANNUAL EXEMPTION
£12,300 per person for 22/23
Used in year or lost - no carry forward
NB Personal allowance deducted from income
Annual exemption deducted from chargeable gains
CAPITAL LOSSES
Losses are offset against gains
o Even if it reduces gains below the annual exemption
If losses exceed gains, they are carried forward and set off against future gains
o But only to the extent that future gains exceed the annual exemption
Cannot offset capital losses against income.
Example
In 2022/23 Jan makes a gain of £15,000 on the sale of land and a loss of £6,000 on the sale of
shares. Her net gain is £15,000 - £6,000 = £9,000, which is covered by the annual exemption.
If the loss on the shares had been £16,000 there would be a net loss of £1,000 which is carried
forward to 2023/24.
Example 2
In 2022/23 Aziz has a gain of £14,000. He has losses brought forward from 2021/22 of £5,000.
He uses £1,700 of the loss to reduce the gain to £12,300 and carries the balance of £3,300
forward to 2023/24
Example 2
• In 2022/23 Aziz has a gain of £14,000. He has losses brought forward from 2021/22 of £5,000.
He uses £1,700 of the loss to reduce the gain to £12,300 and carries the balance of £3,300
forward to 2023/24
RELIEF FOR TRADING LOSSES
If a trader has made a claim for sideways relief for trading losses, the claim can be extended
against capital gains.
CHARGEABLE PERSONS
Individuals resident in the UK
but also non-residents for certain disposals of land
MAIN EXEMPT ASSETS
Tangible moveable property (chattels) sold for less than £6,000
Principal private residences
Assets in an ISA
Gambling winnings
National Savings Certificates and Premium Bonds
Foreign currency
Compensation for injury
Motor Cars
CHARGEABLE DISPOSALS
Usually the chargeable disposal is a sale of the asset
Includes:
Part disposals
Gifts
(treated as a sale at market value)
Loss/destruction
Receipt of a capital sum derived from an asset
GIFTS
A gift is a disposal for CGT purposes
Proceeds are deemed to be market value
Donee’s acquisition cost is also market value
NON-CHARGEABLE DISPOSALS
Gifts to charities and certain other bodies (e.g. art galleries and museums)
Disposals caused by the death of the taxpayer
NB. Disposals between husband and wife are chargeable but are deemed to occur at a value
which results in neither a gain nor a loss i.e. at cost price
CALCULATION OF GAIN
Disposal price less purchase price
Deduct incidental costs of purchase and sale
o e.g. solicitors’ fees, auction fees
Deduct enhancement expenditure
o but not repairs
, LAYOUT OF A COMPUTATION
Disposal Value xxx
Less: Incidental cost of disposal (x)
xxx
Less
Acquisition cost xxx
Incidental cost of acquisition xxx
Enhancement expenditure xxx
Cost of defending title xxx
Valuation fees xxx (xxx)
Chargeable gain or loss xxx
ANNUAL EXEMPTION
£12,300 per person for 22/23
Used in year or lost - no carry forward
NB Personal allowance deducted from income
Annual exemption deducted from chargeable gains
CAPITAL LOSSES
Losses are offset against gains
o Even if it reduces gains below the annual exemption
If losses exceed gains, they are carried forward and set off against future gains
o But only to the extent that future gains exceed the annual exemption
Cannot offset capital losses against income.
Example
In 2022/23 Jan makes a gain of £15,000 on the sale of land and a loss of £6,000 on the sale of
shares. Her net gain is £15,000 - £6,000 = £9,000, which is covered by the annual exemption.
If the loss on the shares had been £16,000 there would be a net loss of £1,000 which is carried
forward to 2023/24.
Example 2
In 2022/23 Aziz has a gain of £14,000. He has losses brought forward from 2021/22 of £5,000.
He uses £1,700 of the loss to reduce the gain to £12,300 and carries the balance of £3,300
forward to 2023/24
Example 2
• In 2022/23 Aziz has a gain of £14,000. He has losses brought forward from 2021/22 of £5,000.
He uses £1,700 of the loss to reduce the gain to £12,300 and carries the balance of £3,300
forward to 2023/24
RELIEF FOR TRADING LOSSES
If a trader has made a claim for sideways relief for trading losses, the claim can be extended
against capital gains.
