Business: Capital Gains Tax - The Basics

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All information provided by HMRC and is covered by Crown Copyright. …

All information provided by HMRC and is covered by Crown Copyright.

All information is based on the UK business system.

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  • 1. © Crown CopyrightInformation used with permission and is covered by Crown Copyright
  • 2. IntroductionYou may have to pay Capital Gains Tax if you make a profit or gain when you dispose of all or part a business asset. Disposing of an asset might be selling it, giving it away or exchanging it.A business asset could be  Shares  Land  Buildings  A business franchise  Fixtures and fittings  The goodwill of the business - its good name or reputation
  • 3. IntroductionIf you own your own business, or youre a partner, you usually report capital gains and losses on your Self Assessment tax return.Its different if your business is carried on by a limited company, in which you may be a director or shareholder. Any profits on assets disposed of form part of the total profits of the company on which it pays Corporation Tax.
  • 4. What is Capital Gains Tax?Capital Gains Tax is a tax on the profit or gain you make when you sell or ‘dispose of’ an asset.You usually dispose of an asset when you no longer own it, for example if you  Sell it  Give it away as a gift  Transfer it to someone else  Exchange it for something else
  • 5. What is Capital Gains Tax?In some cases youre treated as if youve disposed of an asset. For example a business asset has been destroyed and youve received an insurance payout, or other compensation.Capital Gains tax is due on the profit you make, not on the amount of money you receive for the asset.
  • 6. Typical business assetsAssets that are related to trading or to your business in some way are business assets. They are owned by you or by the business partnership.They include all forms of:  Land and buildings used as business premises, for example a shop, factory or workshop  Fixtures and fittings, for example shelves or a counter in a shop  Plant and machinery, for example a computer or a digger  Goodwill, for example the good name or reputation of a business that its built up over the years its been operating (this can have a financial value)  Shares, for example in a personal company  Registered trade marks
  • 7. Working out Capital Gains TaxIn straightforward cases you need to: Look separately at each asset disposed of thats liable to Capital Gains Tax and work out each gain or loss Add together the gains and take away any losses Deduct your tax-free allowance (known as the Annual Exempt Amount) thats due Work out the tax due on the gains that remain
  • 8. Reporting a gain or lossYou pay any Capital Gains Tax through the Self Assessment system and it is calculated as part of your tax return.If you havent received a tax return, but think you need one, you should contact HM Revenue and Customs (HMRC). You may have to pay a penalty if Capital Gains Tax is due and you dont send in a tax return.If youve made a loss on a disposal, youll need to claim it in order to set it off against your gains.
  • 9. PartnershipsWhen youre carrying on a business in partnership, each of the partners is treated as owning an ‘interest in’ (or a share in) each partnership asset.Youll need to fill in the Capital Gains summary (form SA108) of the tax return if:  The partnership has disposed of an asset during the year for example it sold its business premises  Theres been a change in the partnership during the year, for example a new partner joined and youve now got a reduced share in the partnership assets  You left the partnership during the year  Youll each need to work out the gain or loss arising on your interest in (or share in) the asset.
  • 10. Entrepreneurs’ Relief and other taxreliefsIf you own your business, or youre a partner, you may be able to claim tax relief on business assets you sell or dispose of.Reliefs that are available include:  Entrepreneurs Relief  Business Asset Roll-Over Relief  Incorporation Relief  Gift Hold-Over Relief
  • 11. FormalitiesAll the information provided is for informational purposes only and you should seek specialist personalised advice as required. As such, we accept no liability for the actions taken by the readers of this slideshow.All information was provided by Business Link and is covered by Crown Copyright.All information is available as shown below:  HMRC (2012) Capital Gains Tax on business assets: the basics. Available at: http://www.hmrc.gov.uk/cgt/businesses/basics.htm [Accessed: 3rd March 2013]
  • 12. For more information, Twitter: @JasonCates SlideShare: slideshare.net/AdrJasonCates Visit Gov.ukInformation from HMRC