Bloomsbury Professional Capital Gains Tax 2021/22

667 Pages·2021·6.068 MB·English

by  Jacquelyn Kimber, Chris Erwood, Iris Wünschmann-Lyall

Capital Gains Tax 2021/22

Capital Gains Tax 2021/22
Jacquelyn Kimber BA (Hons) CTA ATT
Iris Wünschmann-Lyall MA (Cantab) TEP
and
Chris Erwood CTA ATT TEP
Series General Editor: Mark McLaughlin CTA (Fellow) ATT (Fellow) TEP
Bloomsbury Professional
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Preface
Capital Gains Tax Annual 2021/22 aims to provide a clear and accessible guide
to the taxation of capital gains for busy tax practitioners and taxpayers.
We have taken a practical approach to the subject, concentrating on the most
commonly found transactions and reliefs. The commentary is cross-referenced
to the tax legislation, as well as to the HMRC Manuals and to other HMRC
guidance or tools where appropriate.
This edition includes commentary on the provisions included in Finance
Act 2021 relating to chargeable gains. Perhaps contrary to expectations in
the light of the Office of Tax Simplification’s reports in November 2020 and
May 2021, Finance Act 2021 contained very few changes to the capital gains
legislation. In particular, the OTS’s recommendations that a significant degree
of complexity could be removed from the UK’s tax legislation through the
realignment of rates of capital gains tax with income tax did not lead to any
changes in Finance Act 2021.
A change which will affect many taxpayers is the freezing of the capital gains
tax annual exemption at £12,300 (£6,150 for trustees) for the tax years 2021/22
through to 2025/26. This is covered in Chapter 1.
All examples have been updated to the current tax year. Pointers to relevant
forms and precedents have been added to help you find the correct HMRC
form or appropriate election.
This edition has been fully revised and updated by Jacquelyn Kimber, Chris
Erwood and Iris Wünschmann-Lyall, and is up to date to Finance Act 2021,
which received Royal Assent in June 2021.
We hope you enjoy using this book and would welcome any suggestions for
improvements or changes.
Jacquelyn Kimber
[email protected]
June 2021
v

Contents
Preface v
Table of examples xiii
Table of statutes xix
Table of statutory instruments and other guidance xxxiii
Table of cases xxxv
List of abbreviations xliii
Chapter 1 Introduction to capital gains tax 1
Signposts 1
What is chargeable as a gain 1
History of CGT 3
Who is chargeable to CGT 6
Exempt assets or gains 7
The capital gains tax calculation 13
Reporting of gains 21
Self-assessment procedures 26
Payment of tax 31
Compliance assurance and penalties 33
Chapter 2 Disposals 43
Signposts 43
Definition of assets and disposals 43
When asset value is lost 49
Compensation and other receipts 52
Special situations 55
Chapter 3 Computation of gains and losses 59
Signposts 59
Computational rules 60
Consideration for the disposal 62
Connected persons 69
Delayed or deferred consideration 72
Allowable expenditure 80
Calculation and use of losses 87
Deduction of reliefs 97
vii
Contents
Chapter 4 Particular assets 101
Signposts 101
Shares and securities 101
Options and deposits 107
Chattels 109
Wasting assets 110
Finance arrangements 113
Assets appropriated to or from trading stock 115
Chapter 5 Foreign issues 119
Signposts 119
Introduction 119
Basis of the charge to CGT 120
Foreign assets 121
Location of assets 124
Territorial limits of CGT 125
Residence and ordinary residence prior to 6 April 2013 – the old law 136
Statutory residence test to determine residence from 6 April 2013 –
the current rule 137
Non-residents doing business in the UK 144
Anti-avoidance: temporary non-residence 147
Foreign assets of non-UK domiciled taxpayers 150
Apportionment of non-resident company’s gains 162
Double tax relief 166
Offshore (non-UK resident) settlements 166
Penalty regime 169
Increased penalties to tackle offshore tax evasion 169
New criminal offence of failing to declare offshore income/gains 171
Compliance disclosure opportunity – ‘requirement to correct’ 172
Extension of offshore limits 174
Chapter 6 Partnerships 175
Signposts 175
How CGT applies to partnerships 175
Partnership assets and ‘other’ assets 179
Disposal of partnership assets 182
Change in fractional share of assets 186
Limited liability partnerships 191
HMRC Statement of Practice D12 192
Chapter 7 Administration of an estate 201
Signposts 201
Introduction 201
Capital gains tax in the period to the date of death 202
Capital gains tax in the administration of an estate 203
Legatee or beneficiary 212
viii
Contents
Main residence relief 213
Deeds of appointment, variations or disclaimers 216
Sales by legatees 221
Chapter 8 Capital gains tax – settlements 223
Signposts 223
Introduction 224
Definition of ‘settlement’ and ‘settled property’ 225
The creation of a settlement 226
Actual and deemed disposals by trustees 230
Disposal of interests in settled property 235
Sub-fund elections 237
Rates of tax 238
Particular transactions affecting trusts 241
Exemptions and reliefs 243
Main residence relief and trustees 250
Main residence relief, trusts and hold-over of gain under TCGA
1992, s 260 255
Settlor-interested settlements 257
Residence of trust 259
Trusts for vulnerable and disabled persons 261
Compliance 263
Chapter 9 Companies 265
Signposts 265
Basis of charge 265
Rebasing 269
Indexation allowance 272
Capital losses 277
Identification of shares 279
Groups of companies 281
Relief on disposal of shares 288
Chapter 10 Land and property 295
Signposts 295
Outline 295
Treatment of land transactions 296
Part disposals of land 297
Leases of land 299
Residential property 305
Furnished holiday lettings 307
Non-resident CGT 311
Annual tax on enveloped dwellings (ATED) 315
Profits taxed as income 317
ix