Capital Gains Tax (CGT) comes into play when you make a profit from selling something you own (an asset) and whilst it applies to most assets there are exceptions. The important point is that the tax is calculated on the profit you make, and not the amount you sold it for. As the name suggests, it’s all about the gain!
We are asked to advise on a range of aspects potentially affected by CGT, from disposals of business interests and property sales to the new world of crypto assets. We have highlighted below some recent CGT developments.
Crypto assets – have become a fast-growing area requiring professional advice. Where an individual invests in these, they can expect to be liable to tax for any gains realised on the disposal of such assets.
HM Revenue & Customs (HMRC) defines the disposal of a crypto asset as including:
- a sale
- an exchange for a different type of crypto asset
- usage to pay for goods or services and
- a gift (excluding gifts to a spouse or civil partner).
The onus is on the individual to keep an accurate record of transactions and to report any such gains within a self-assessment tax return.
Reporting requirements for non-residents disposing of UK property - came into force for transactions on or after 6 April 2015. They apply where residential property is disposed of by a non-resident individual, close company, trustee or personal representative. In such cases, a report must be filed to HMRC within 30 days from the date of completion.
From 6 April 2019, the requirement to notify has been extended to include disposals of commercial property and indirect holdings of property, for example through a company that holds UK land as an investment.
Proposed changes to CGT - were included in the 2018 autumn budget. These relate to two areas where relief is currently available to offset chargeable gains.
- Entrepreneurs relief - where an individual sells all, or part, of their business, or shares and securities in a personal company, the rate of CGT is reduced to 10%, where certain conditions are met. For disposals made on of after 6 April 2019, the period required for the qualifying conditions to be met will be increased from one to two years.
- Main residence relief - this is available when an individual disposes of property that has been their only or main residence.
There are two proposed changes to this relief, both of which would take effect from 6 April 2020. The first seeks to reduce the final period of non-residence allowed for relief from the current 18 months to nine months. This is likely to impact on couples who are separating or getting divorced and where the matrimonial home is being sold, especially given the current slowdown in the housing market.
The second change concerns the lettings exemption, which is currently available where property, which has been the main residence, has also been let out during the period of ownership. It is proposed that this relief be restricted to shared occupancy situations only, where the owner and tenant both reside at the property.
It should be noted that, at the time of writing, while these changes have been consulted on with professional bodies, they have not yet been implemented.
CGT remains a complex area of law and, apart from the most straightforward transactions, advice should be sought at the earliest opportunity.
