Capital Gains Tax


F

Farmer Giles

I wonder if there are any experts here on CGT. I have a friend who needs
some advice - I've looked on the HMRC website but I find the details
there quite confusing.

I understand that the current exemption is £10,600 in any one financial
year. Is that the limit regardless of when the asset to be disposed of
was acquired.

For example: let's say that someone bought some land in 1980 for £10,000
and then sold it this year for £30,000. The gain in actual terms would
of course be £20,000, although in real terms there probably wouldn't be
a gain at all, what CGT would be levied?
 
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D

David Woolley

Farmer said:
For example: let's say that someone bought some land in 1980 for £10,000
and then sold it this year for £30,000. The gain in actual terms would
of course be £20,000, although in real terms there probably wouldn't be
a gain at all, what CGT would be levied?
Is this someone, a company that pays corporation tax? If so, when,
exactly, did the purchase happen?

http://www.hmrc.gov.uk/manuals/cgmanual/cg10243.htm

What were the costs of purchase and sale? For land, there may be
allowable maintenance costs.

Are they are higher rate tax payer, or close to the threshold?

http://www.hmrc.gov.uk/manuals/cgmanual/cg21200.htm
 
F

Farmer Giles

Is this someone, a company that pays corporation tax? If so, when,
exactly, did the purchase happen?

http://www.hmrc.gov.uk/manuals/cgmanual/cg10243.htm

What were the costs of purchase and sale? For land, there may be
allowable maintenance costs.

Are they are higher rate tax payer, or close to the threshold?

http://www.hmrc.gov.uk/manuals/cgmanual/cg21200.htm

Thanks for the reply. This is an individual, not even self-employed. I
believe his income would be around the 30k pa area - so a bit below the
higher rate threshold. My question is really about the length of time
that an asset is held - ie does HMRC make any allowance for the
reduction in real-term gain over time. It would seem very unfair if
there is no allowance for inflation if an asset bought 20 or 30 years
ago is disposed of.
 
D

David Woolley

Farmer said:
Thanks for the reply. This is an individual, not even self-employed. I
believe his income would be around the 30k pa area - so a bit below the
higher rate threshold. My question is really about the length of time
that an asset is held - ie does HMRC make any allowance for the
reduction in real-term gain over time. It would seem very unfair if
there is no allowance for inflation if an asset bought 20 or 30 years
ago is disposed of.
As the first reference explains, they used to make an allowance, then
they froze it and introduced a different way of rewarding non-day
traders, but recently they eliminated all of these for individuals.

The first sub-reference, from the first reference, goes into a lot of
the history.

However acquisition and sales costs (e.g. solicitor's fees) can be set
against the initial value, and, for something like land, which has to be
maintained, you may be able to set the cost of maintenance off against
the initial cost, although I have no personal experience of this.
 
D

David Woolley

David said:
As the first reference explains, they used to make an allowance, then
they froze it and introduced a different way of rewarding non-day
traders, but recently they eliminated all of these for individuals.

The first sub-reference, from the first reference, goes into a lot of
the history.

However acquisition and sales costs (e.g. solicitor's fees) can be set
against the initial value, and, for something like land, which has to be
maintained, you may be able to set the cost of maintenance off against
the initial cost, although I have no personal experience of this.
Also note that HMRC expect the taxpayer to do most of the calculation,
so if the person doesn't understand the rules, based on the material
supplied with the capital gains form, they need to consult an
accountant, or at least contact HMRC for clarification.
 
F

Farmer Giles

As the first reference explains, they used to make an allowance, then
they froze it and introduced a different way of rewarding non-day
traders, but recently they eliminated all of these for individuals.

The first sub-reference, from the first reference, goes into a lot of
the history.

However acquisition and sales costs (e.g. solicitor's fees) can be set
against the initial value, and, for something like land, which has to be
maintained, you may be able to set the cost of maintenance off against
the initial cost, although I have no personal experience of this.

Many thanks for your help, I'm very grateful to you.

I thought that they used to make such an allowance. Still seems very
unfair to me that they don't any longer.
 
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T

tim.....

Farmer Giles said:
Thanks for the reply. This is an individual, not even self-employed. I
believe his income would be around the 30k pa area - so a bit below the
higher rate threshold. My question is really about the length of time that
an asset is held - ie does HMRC make any allowance for the reduction in
real-term gain over time. It would seem very unfair if there is no
allowance for inflation if an asset bought 20 or 30 years ago is disposed
of.
The great god Gordon abolished indexing.

and you get around not being able to carry forward your annual allowance by
"bed and breakfasting" your assets, but it's not very easy to do with a
specific piece of land (though not entirely impossible).

tim
 

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