Investment and risk

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The value on which the gain (or loss) is based is normally the consideration received for it. However, on gifts or on certain sales (such as those between members of the same family), the open market value is used instead.

There is no CGT payable on a person’s assets when they die. The beneficiaries of a deceased person’s estate will be regarded as acquiring the assets of the deceased at their market value at the date of the deceased person’s death.

Certain costs are allowable in calculating chargeable gains:

The acquisiti...

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Reinvestment relief is provided on chargeable gains made by individuals who reinvest their gains into shares eligible for the enterprise investment scheme (even if income tax relief is not given). All or part of the gain (depending on the amount reinvested) is deferred until the shares are sold, subject to certain qualifying conditions being met. The reinvestment must be within a period starting one year before and ending three years after the disposal.

Holdover relief allows the gain on the gift of a business asset to be deferred if the donor and recipient of the gift both make this choice. Holdover relief is usually available on the transfer of an asset into any trust other than an absolute (bare) trust.

He sold a second home in Devon in June 2014 for £350,000 that he purchased in May 1996 for £120,000. He paid £3,500 estate agents fees on sale and legal costs of £1,600. When he bought the house he had to pay stamp duty of £1,200 and legal costs of £450.

His taxable gain is as follows:

£

£

Disposal proceeds

350,000

Less disposal costs

Estate agent’s fees

(3,500)

Legal costs

(1,600)

Less

Acquisition cost

(120,000)

Stamp duty

(1,200)

Legal costs

(450)

223,250

Less

Annual allowance

(11,000)

Gain chargeable to tax

212,250

Tax £212,250 x 28% = £59,430

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