Capital Gains Tax Reliefs
There are various Capital Gains Tax reliefs available. These can be tested in any of the CII tax exams as well as in the financial planning written exams R06 and AF5.
THIS ARTICLE IS RELEVANT TO EXAMINABLE TAX YEAR 2018/19.
There are various reliefs available for when an owner sells or disposes of their business or if they are selling and replacing assets used in their business. Here is a table with the main facts of each:
| Entrepreneurs’ Relief Claimed when selling/disposing of a business Whether in a partnership or a sole trader or where an individual holds at least 5% of the ordinary share capital in their trading company and can exercise at least 5% of the voting rights First £10m of lifetime qualifying gains taxed at 10% Must own assets for at least 1 year (2018/19) Investors’ Relief An extension of entrepreneurs’ relief For external investors in unlisted trading companies £10m limit /10% rate Conditions: Shares newly issued/ Issued post 16/3/16 Held for 3 years since 6/4/16 | Holdover Relief Used to hold over a gain on gift disposals Applies to transfers chargeable to IHT and disposals of trading assets CGT not paid at time of gift Acquisition cost to donee reduced by held over gain/this increases gain on subsequent disposal Not available for transfers into settlor interested trusts | Rollover Relief Used when business assets are sold and proceeds used to buy new business assets Relief defers gain until disposal of new assets New assets must be bought between 1 year before and 3 years after disposal of old assets Rollover Relief on Incorporation Used where an unincorporated business is transferred to a ltd co in exchange for new shares Relief defers the gain until shares are disposed of/gain is deducted from the issue price of the shares lowering base cost | Reinvestment into EIS Defers CGT on disposal of any asset by investing in EIS shares Gain deferred until disposal of EIS shares Shares must be held for 3 years No CGT on growth in the EIS shares EIS shares must be bought up to 3 years after the disposal or 1 year before SEIS Shares Part exemption where gains are reinvested into SEIS shares Not deferred/ 50% of reinvested capital gains are exempt SEIS shares must qualify for income tax relief Remaining 50% of reinvested gains are chargeable Relief restricted to £100,000 of gains reinvested each year |
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Alternatively, you can download taster resources for AF1, AF2, AF4, AF5, J03, R02 or R06 if you’re revising for any of those exams.