Planning for capital gains tax
Capital Gains Tax (CGT) is arguably now the most complex part of our tax system. The accurate computation of a gain (or a loss, for that matter) can require a complete history of the asset in question and detailed records of expenditure, but this is often just the starting point.
If the asset has been held for more than a year, taper relief may be relevant - the precise rate will depend on whether the asset was used for business, non-business or mixed purposes. If the asset was held prior to April 1998, it will be necessary to calculate indexation allowance as well. The taper relief deduction depends on the interaction with the annual exemption and with capital losses, some of which may be offset against other gains and some of which may not.
Other reliefs, for example, those for occupation as a principal private residence and the ‘lettings exemption’, also come into play. At the end of all that, if you arrive at a net gain you may be in a position to hold it over or to defer it through reinvestment of some or all of the proceeds, and if you arrive at a net loss there may be scope to obtain relief for this elsewhere.
A source of expert advice
The complexity of the capital gains tax system means that this should only be considered a ‘do-it-yourself’ tax in respect of the simplest cases. If the amounts involved are significant, if the computations are anything other than straightforward, or if you just need reassurance that you haven’t missed anything, expert advice should be taken. At UHY Hacker Young you can access a great wealth of knowledge and experience, not only of the tax itself, but of your circumstances (CGT hits individuals, trustees and executors), your business sector (in the case of possible claims for business asset taper relief) and the type of asset in question.
Come to us first
The phrase ‘If only he [or she] had spoken to us first’ is heard time and time again when we deal with CGT computations. If the proceeds are expected to be substantial, and particularly if the asset is something other than quoted shares, speak to us before the transaction has been finalised. You should be aware in advance of your likely liability and the reliefs available to you and the opportunity to structure a sale contract to your advantage should not be wasted.
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