1、Slide 277,Quiz 2,1. If a sole trader buys a machine for 60,000 and a low emission car for 20,000, how much capital allowance would he receive? 2. Are the following expenses allowable or disallowable for tax purposes: customer entertaining staff entertaining depreciation political donations local cha
2、ritable donations food hamper to a customer costing 40 with the business logo attached legal fees re renewal of a 20 year lease 3. How are motor cars treated for capital allowance purposes? 4. What is a short life asset?,Slide 278,Quiz 2,5. If a new factory is bought for 500,000 and this cost is mad
3、e up of the following:Land 100,000Staff canteen 80,000Drawing office 40,000Cost of levelling land 10,000Office accommodation 70,000Factory 200,000 How much would qualify for industrial buildings allowances? 6. What are the opening year rules for assessment of trading profit when a sole traders busin
4、ess commences? 7. What are overlap profits and when can they be relieved? 8. What loss relief is available to a business which makes a loss in the first year of its trade? 9. What loss relief is available to a business which makes a loss in the final year of its trade? 10. What NIC is payable by emp
5、loyers and employees?,Slide 279,Solution to Quiz 2,1. 60,000 AIA and 20,000 ECA on car. Total of 80,000 2. Customer entertaining disallowableStaff entertaining - allowableDepreciation - disallowablePolitical donations - disallowableLocal charitable donations - allowableFood hamper to a customer cost
6、ing 40 with the business logo attached - disallowableLegal fees re renewal of a 20 year lease allowable 3. If car acquired before 6/4/09If cheap, cost 12,000 go into general pool and get 20% WDAIf expensive, cost 12,000, treat separately, get WDA of 20% restricted to 3,000.If car acquired after 6/4/
7、09If CO2 emission 160g/km = 10% WDA,Slide 280,Solution to Quiz 2,4. An item of plant and machinery (not cars) where an election is made to depool it.It therefore gets treated separately, receiving all the normal allowances but a balancing allowance/charge arises on sale.Assets should have a life of
8、12 months last 12 monthsYear 3 CYB,Slide 281,Solution to Quiz 2,7. Arise when a trade commences and the trader does not adopt a 31 March/5 April year end. They can be relieved when trade ceases but also when there is a change of accounting date where date moves closer to 31 March/5 April 8. Against
9、net income of year of loss and/or previous year and gains of these years.Carry forward against future trading incomeCarry back against net income of three preceding tax years on FIFO basis 9. Against net income of year of loss and/or previous tax yearTerminal loss relief loss of last 12 months can b
10、e carried back against trading profits of 3 preceding years on LIFO basis 10. Employees pay Class 1 on cash earningsEmployers pay Class 1 on cash earnings and Class 1A on benefits,Chapter 13,Computing chargeable gains,Syllabus Guide Detailed Outcomes,Describe the scope of capital gains tax. Explain
11、how the residence and ordinary residence of an individual is determined. List those assets which are exempt. Compute capital gains. Explain the treatment of capital losses. Explain the treatment of transfers between a husband and wife or between a couple in a civil partnership.,Slide 283,Syllabus Gu
12、ide Detailed Outcomes,Compute the amount of allowable expenditure for a part disposal. Explain the treatment where an asset is damaged, lost or destroyed and the implications of receiving insurance proceeds and reinvesting such proceeds. Compute the amount of capital gains tax payable.,Slide 284,Ove
13、rview,Slide 285,Chargeable disposal,Computing chargeable gains,CGT payable,Damaged/ destroyed assets,Losses,Calculation of gain,Chargeable asset,Part disposal,Husband and wives,Introduction,Chargeable persons Chargeable disposal Exempt disposals Chargeable asset Basis,Slide 286,CGT payable by indivi
14、duals,Individuals receive an annual exemption of 10,100 (2010/11). Gains are taxed at 18% if they fall into any remaining basic rate band and 28% where they exceed this threshold.,Slide 287,Lecture example 1,Thomas Arne realises a chargeable gain of 23,800 in 2010/11. He has taxable income of 30,000
15、 for this tax year. RequiredCalculate Thomas CGT payable for 2010/11.,Slide 288,Answer to Lecture Example 1, Chargeable gain 23,800 Annual exemption (10,100) Taxable gain 13,700 Basic rate band remaining 37,400 30,000 = 7,400 CGT payable 7,400 18% = 1,332 6,300 28% = 1,764 13,700 3,096,Slide 289,Sli
16、de 290,Capital gains tax,Paid by individuals,2010/11,5/10/11,31/01/12,Slide 291,Calculation of gain, Gross proceeds X Less selling expenses (X) Less cost (X) Less enhancement expenditure (X) Gain/(loss) X/(X),Lecture example 2,Mr Ripley sells an assetRequiredWhat is Mr Ripleys chargeable gain?,Slide
17、 292,Answer to Lecture Example 2,Slide 293,Year end computation,Current year losses Current year losses must be offset against current year gains. The annual exemption is then deducted from any remaining gain.,Slide 294,Lecture Example 3,In 2010/11, Ted makes a gain of 45,000 on an asset, and also 1
18、0,000 on another. He makes a capital loss of 31,000. Ted has no capital losses to bring forward from earlier years.Required Show Teds taxable gains for 2010/11.,Answer to lecture example 3,Losses carried forward from earlier years,Where losses are carried forward from earlier years, they need only b
19、e used to the extent needed to bring the gains down to the level of the annual exemption.,Slide 297,Lecture Example 4,Tara makes a gain in 2010/11 of 14,000. She makes no other disposals in the tax year. Tara has capital losses brought forward from last year of 12,000.RequiredShow how the gain is re
20、lieved by loss relief and the loss to carry forward to 2011/12.,Answer to lecture example 4,Slide 300,Losses,Total Current gains X CY capital losses (X)1 X Capital losses b/fwd (X)X,Less AE (10,100),Taxable gain X,Slide 301,Part disposal,Gain? - Proceeds = 100,000Cost?20,000 x 100,000/500,000 = 4,00
21、0,Lecture example 5,Fred sells two paintings for 40,000 on 7 September 2010 from a set of four that cost 30,000 in March 1990. He suffers 10% auctioneers fees. The MV of the remaining two paintings is 35,000. RequiredCalculate the chargeable gain arising on 2010/11.,Slide 302,Answer to Lecture Examp
22、le 5,Slide 303,Transfers between husband and wife,Transfers of assets between spouses are on a no gain/no loss basis. Recipient spouse is treated as if they bought the asset at the transfer date for a price equal to cost. The above rules apply to civil partners as well.,Slide 304,Lecture example 6,J
23、ulie bought an antique table for 8,000 in January 1985. In August 1991 she transferred the table to her husband Joseph.Joseph subsequently sold the table at the end of October 2010 for 20,000. RequiredWhat is Josephs chargeable gain?,Slide 305,Answer to Lecture Example 6,Slide 306,Slide 307,Compensa
24、tion,Compensation = proceeds,Asset destroyed,Full disposal,R/O if replaced 12m,Asset damaged,Restoration = enhancement,Lecture example 7,Mr James bought a holiday cottage for 40,000 in August 1990. In August 2000 the cottage was damaged in a fire. An insurance claim was made and 33,000 was received
25、in September 2000. The cottage was valued at 45,000 after the fire.In December 2000 Mr James put 37,000 into restoring the cottage. He then sold the cottage for 95,000 in December 2010. Required(a) Calculate the gain arising assuming Mr James elects for there to be no part disposal. (b) How would yo
26、ur answer differ if no election were made?,Slide 308,Answer to Lecture Example 7,Slide 309,(a) As all of the compensation received has been used to restore the asset Mr Jones can elect to disregard the part disposal.Base cost of restored property is 40,000 33,000 + 37,000 = 44,000. December 2010 Pro
27、ceeds 95,000 Base cost (44,000) Chargeable gain 51,000,Answer to Lecture Example 7,Slide 310,Assets destroyed,If an asset is completely destroyed, there is a full disposal and compensation monies are wholly charged to CGT. If the compensation receipts are reinvested in a replacement asset within 12
28、months, a form of roll over relief is available. The replacement asset need not be the same as the original. It can be any asset provided it is within the charge to CGT.,Slide 311,Lecture example 8,Jeff bought a painting for 30,000 in October 2000. It was completely destroyed on 25 August 2010. Jeff
29、 received insurance proceeds of 40,000 on September 2010 and spent 36,000 on a replacement asset in November 2010. RequiredCompute the chargeable gain and the base cost of the new asset.,Slide 312,Answer to Lecture Example 8,Slide 313,Chapter summary,Slide 314,Chapter summary,Slide 315,Chapter 14,Ch
30、attels and principal private residence exemption,Syllabus Guide Detailed Outcomes,Identify when chattels and wasting assets are exempt. Compute the chargeable gain when a chattel is disposed of. Calculate the chargeable gain when a wasting asset is disposed of. Compute the exemption when a principal
31、 private residence is disposed of. Calculate the chargeable gain when a principal private residence has been used for business purposes. Identify the amount of letting relief available when a principal private residence has been let out.,Slide 317,Overview,Slide 318,Chattels,Wasting,Non wasting,Spec
32、ial rules,Exempt,Overview,Slide 319,PPR,Letting relief,Calculation,Periods of occupation,Chattels,Non wasting assets,Slide 320,Slide 321,EXEMPT,NORMAL CGT RULES,GP = 6,000,Restrict gain 5/3 (GP-6,000),Chattel rules,Rules for computing gains/losses on non-wasting chattels,Slide 322,Lecture Example 1,
33、Orlando Gibbons purchased a rare manuscript for 500. He sold it several years later for 9,000, before deducting the auctioneers commission of 1,000. Antique bought for 7,000 and sold several years later (December 2010) for 3,000.,Lecture Example 1 contd,Required,What is the chargeable gain or loss a
34、rising on the disposal of the manuscript? What is the chargeable gain or loss arising on the disposal of the antique?,Answer to lecture example 1,Wasting chattels,Wasting chattels have an expected life on disposal of 50 years. Such assets are exempt from CGT, unless it is plant and machinery qualify
35、ing for capital allowances, in which case if sold for a loss no capital loss is given as fall in value is given through capital allowances. If plant and machinery is sold for a gain, follow non-wasting chattel rules.,Slide 326,Lecture example 2,On 31 March 2011 Nigel sold a copyright for 17,280. It
36、had been purchased on 1 April 2006 for 18,000 when it had an unexpired life of 20 years. RequiredCompute Nigels chargeable gain.,Slide 327,Answer to Lecture Example 2,Slide 328,PPR relief,Gain x,Slide 329,Period of occupation,Period of ownership,Slide 330,PPR,3 yrs - any reason Any period - working
37、abroad 4 yrs - working elsewhere in UK * Last 36 mths always deemed occup.,Occup. before,Occup. after,Deemed occup.,Periods of occupation,The last 36 months are always deemed occupation in full provided it was the taxpayers PPR at some point.,Slide 331,Part occupation,If any part of the residence is
38、 not occupied by the owner for residence purposes, PPR relief will be proportionately withdrawn. The application of the last 36 month rule will depend on whether the property has always been only part occupied or whether it has at some point all been residential.,Slide 332,More than one residence,Th
39、e taxpayer may choose which home is to be his PPR, provided that each has been occupied at some point. If the owner is unable to occupy his own home because he is required to occupy jobrelated accommodation, his own home will be deemed to be his main residence, provided that he intends to occupy it
40、at some point.,Slide 333,The letting exemption,If part of the main residence is let out, a gain may arise on the part let out. For residential lets this gain may be covered by letting relief which is the lowest of:(i) The gain arising in the letting period not covered by PPR relief.(ii) 40,000.(iii)
41、 The PPR relief already given.,Slide 334,Lecture Example 3,Harry bought his house in London on 1 April 1986 and lived in it until 1 April 1987. From that date until 1 April 1992 he was required by his employers to work overseas. On returning he moved back until 1 October 1992 when he went to live wi
42、th his mother. The house remained empty until 1 April 2005 when it was rented out. He sold his house on 30 September 2010 realising a gain of 100,000.Required Calculate the gain on sale of his house.,Answer to lecture example 3,PPR periods of absence,Answer to lecture example 3 contd,Chapter summary
43、,Slide 338,Chapter 15,Business reliefs,Syllabus Guide Detailed Outcomes,Explain and apply entrepreneurs relief as it applies to individuals. Explain and apply rollover relief. Explain and apply holdover relief for the gift of business assets. Explain and apply the incorporation relief that is availa
44、ble upon the transfer of a business to a company.,Slide 340,Overview,Slide 341,Business reliefs,Assets qualifying,Entrepreneurs relief,Assets qualifying,Conditions,Conditions,Incorporation relief,Rollover relief,Gift relief,Conditions,Assets qualifying,Conditions,Assets qualifying,Entrepreneurs reli
45、ef,The relief covers the first 1m of chargeable gains on the disposal of:(a) whole or part of a business. However relief is only available in respect of gains on the disposal of business assets, therefore no relief on gains arising from investments.(b) the disposal of shares in a trading company whe
46、re an individual has a 5% shareholding and is also an employee of the company. There is no restriction if company holds non-trading assets like investments.,Slide 342,Lecture example 1,Gerald sold his sole trader business on 3 August 2010. Gains arose on chargeable assets as follows:All assets had b
47、een owned for 1 year prior to disposal.,Slide 343,Lecture example 1,On 23 March 2011 Gerald sold a 15% shareholding in Puddle Ltd which resulted in a chargeable gain of 600,000. Gerald had acquired these shares on 1 June 2004 and had been an employee of the company ever since. Gerald has taxable inc
48、ome of 10,000 for 2010/11 and capital losses of 15,000 brought forward. Required Calculate Geralds capital gains tax liability for 2010/11, assuming Gerald has not previously claimed entrepreneurs relief.,Slide 344,Answer to Lecture Example 1,Slide 345,Answer to Lecture Example 1,Slide 346,Gift reli
49、ef,The relief Disposals by way of gift or sale at undervalue are chargeable to CGT, with proceeds deemed to be market value. Under certain circumstances a gift relief claim can be made jointly by donor and recipient to rollover the gain.,Slide 347,Gift relief,Conditions Disposal is made to an individual who is UK resident or ordinarily resident. Disposal is of a business asset used in donors trade or of unquoted shares in a trading company, or quoted shares in a personal trading company ( 5%).,
