Capital Gain Tax

Capital Gains Tax ("CGT") is payable to the Inland Revenue when an individual or a company sells or transfers an asset to someone else. You only have to pay CGT if, on disposing of an asset, you have made a chargeable gain. Typically, you make a gain if the asset is worth more than it was when you acquired it. This appears straightforward but is complicated by taper reliefs, different treatments for different assets, and tax deductions that may be available for some assets but not for others. As an example, you will not normally have to pay CGT if you sell your home, but if you have a second home, or have previously rented out your home, different treatments may apply.

You are entitled to £7,900 of net gains free of tax (2003/04). The rate of CGT depends on your own personal circumstances. In general terms, you pay tax at whatever your highest rate of tax is. For many this may be 40%. CGT calculations can be extremely detailed. This is another area where Smith & Eades can assist, either for personal or business tax purposes. Using our knowledge, we can ensure that your CGT submission to the Inland Revenue is correct in all respects, that appropriate reliefs have been claimed and so maybe reduce or completely wipe out your CGT bill. We can also help you plan disposals to make use of the CGT exemption and minimise your liability to CGT. Remember, with all taxes, but with CGT in particular, it is extremely important to have expert advice even before you sell or transfer an asset.

Things to think about:

Consider deferring disposals until after 5th April to delay CGT payment by a full year and maximise taper relief.
If you intend to retire from business in the next few years, plan ahead to minimise CGT on disposal of your busines or family company. And combine this with IHT planning.
If you have more than one home, consider making or revising an election to determine which one will qualify for the CGT exemption.
Claim losses on assets that have become worthless.
It is better to realise gains in a year in which income is relatively low than to pay CGT at 40%.

There is is also an option to consider EIS deferral relief, which allows you to defer gains on disposal of any chargeable asset against investment in new ordinary shares in a qualifying unquoted trading company. Also, you may consider VCT deferral which operates in a similar way but allows you to 'pool and spread' your investment with other investors, and via investment managers.

For further information on our Tax Consultancy work, or if you wish to discuss the above or related matters with our qualified advisers, please contact us on info@smith-eades.co.uk