To ensure the impact of this tax is as small as possible please contact us for planning advice prior to the of any asset. Care must be taken when considering such disposals likely to produce a capital gain. There are many facets involved meaning that calculating a gain, and planning to reduce it, can be very complex.
>>> PROPERTY DISPOSALS > all disposals of residential property, dwelling property MUST be notified to HMRC within 30 days of disposal AND and Capital Gains Tax due MUST also be paid within the same 30 days. NOTE disclosure Notifications are different for UK tax residents and non-residents so be careful.
For a brief overview of each factor bearing on capital gains please scroll down to any of the following subjects that are of interest.
Rates of charge
Disposal of business assets
Tax is chargeable on profits made from any disposal or a chargeable asset by a person “resident or ordinarily resident” (as defined) in the UK. Rules were introduced in the UK by the Finance Act 1965 and the latest consolidated legislation is the Taxation of Chargeable Gains Act 1992 (TGCA). Many amendments have been made to the legislation, most notably the “rebasing” of the start date for this tax from 6th April 1965 to 31st March 1982. Unrealised gains attributed to the intervening period are, prima facie, not taxed.
Special rules apply at all times to transactions in stocks and shares and to other assets held at 31st March 1982.
Included are any and all types of property wherever located and will include (but not be limited to) land,
buildings, stocks/shares, collections and other traded items. Also, included will be assets of a more intangible nature (e.g. goodwill, options, rights, debts) and non sterling currency.
For the tax year 2023/24, the first £6,000 of chargeable gains is exempt. This is granted to
individuals and personal representatives (for the year of death and following two years). Most trusts, generally, qualify for an annual exemption of half this amount.
Rates of charge
Individuals: Taxable gains are subject to a tax charge between 10% and 28% depending on (a) the the nature of the asset disposed of and (b) the highest rate of tax paid generally by the disposer personally.
Broadly speaking companies are subject to the same rules for calculating capital gains, but the rates of charge and other aspects will differ.
Companies do NOT pay Capital Gains Tax but, instead, pay corporation tax on gains (indexation relief ended December 2017)
Although “disposal” will be the trigger for charging this tax, the legislation does not define it. The word therefore taken its normal meaning but, as you will not be surprised to learn, case law and other factors have worked through the years to establish parameters. Due to complexities in this area, we do not feel able to go into great details here and must recommended contacting us for special advice. Tax is charged with reference to the tax year which includes the date of disposal. The exact date for contractual disposal is therefore of prime importance. If a disposal is to be made late in the tax year, it may be worth considering delaying until early in the next tax year. Such a change could grant a twelve month delay in the tax becoming payable, thereby improve cash flow and earn another year’s interest.
Both are basically calculated in the same way and the steps to be followed are these:
1. Total proceeds of disposal
Less: ancillary costs of disposal (agent’s commission, statutory fees etc.)
= Net Proceeds
2. To acquisition price/cost/value
Add: ancillary costs of acquisition (stamp duty, professional fees etc.)
= Total costs
1. less 2. results in a gain, a loss or “no gain, no loss” position.
There are other deductions and reliefs which can be claimed to reduce the gain still further most notably the annual personal exemption and special exemptions applying to dwelling houses.
Specific rules relate to non-resident or non-UK-domiciled persons and to persons with temporary residence/non-residence in the United Kingdom.
The minimum condition, to escape the tax, is that an individual must be resident outside the United Kingdom for “five years” (as defined).
Non-resident people who own private dwelling homes in the UK become subject to NEW Capital Gains Tax rules on disposal of such property after 6th April 2015. Care and planning is advised here. Property revaluation and complex calculation options need to be considered carefully to achieve the lowest tax charge possible.
BUSINESS ASSETS DISPOSAL RELIEF
This relief replaced Entrepreneur’s Relief in 2020.
In essence this relief allows the first £1M of qualifying gains on the disposal of a business (known as the “lifetime limit”) to be charged at an effective rate of 10% Capital Gains Tax.
However there are many restrictions and conditions on which types of disposals would qualify for this relief. This may result in many business and individuals owning assets with locked in capital gains seeing their tax bills rise on disposal of such assets.
Note that this Relief is not available to everyone and is not awarded automatically. It must be organised, planned well in advance and properly claimed. So don’t forget.
This would give a real tax rate of only 10% to a 40% taxpayer.
NEW: MANY SHARES OWNED BY EMPLOYEES IN THEIR EMPLOYER’S COMPANY ALSO QUALIFY FOR THIS REDUCED RATE.
Property owned personally but rented to the company is subject to special rules.