Capital Gains Tax (CGT)

CGT, and its interaction with income tax and inheritance tax is not a simple issue. We can advise on the implications of particular transactions but the best advice we can give is that you seek our advice before you enter into any transaction. CGT is due on any gains you make on the sale of assets or if you give away an asset that would have been liable to CGT if you had sold it. There is a list of exemptions, the most important of which is that your main residence (the house you live in) is exempt from CGT if you make a profit selling it, but their availability can depend on the nature of the transaction you are entering into and its timing.

Certain small items (provided they are not part of a larger collection) and cars are also exempt from CGT.

The sale of shares in a company, the sale of a business or the sale of a second property may all give rise to a CGT liability and we can assist with calculating the tax due or in seeking ways to defer the tax to a later date.

The principal relief from CGT was Taper Relief prior to 6 April 2008. This came in two forms: Business Asset Taper Relief and Non-business Asset Taper Relief. These both worked in much the same way so that the longer you kept an asset before you sold it, the smaller the tax liability. Business Asset Taper Relief was the more beneficial but whether you could claim it depended on how the asset in question was used. Provided you had owned a qualifying business asset for more than two complete tax years before you sold it, tax was due on 25% of the gain. With a non-business asset the lowest percentage of the gain that was taxable was 60% after ten years’ ownership.

On 6 April 2008 taper relief and, for individuals, indexation allowance were abolished in favour of a flat rate tax of 18%.  Inevitably, this has meant some winners and some losers.  The new Entrepreneurs Relief (which, broadly, taxes certain gains up to £1m at the equivalent of 10%) has been introduced to alleviate the concerns of business owners who would otherwise have suffered greatly by this change.  Details of the new rules can be found elsewhere on our website.

The interplay between CGT payable by companies and by shareholders in complicated but we are happy to advise in relevant cases, and we can also advise where CGT and inheritance tax affect one another.

It may be possible to avoid paying CGT but that usually means undertaking appropriate tax planning sooner rather than later. We can advise on this.