Capital gains tax (CGT) can apply on the disposal of assets, from a single item to a multi-million pound business. There are numerous reliefs available to manage liabilities, thus maximising the money in your pocket.
Broadly, any transfer of chargeable assets by an individual (or trustee) is subject to CGT, unless a specific exemption applies or a relief can be claimed.
Whilst many people are aware that CGT is not generally payable on the sale of their home, relatively few realise this is due to a specific relief for the disposal of a main private residence. Therefore, it does not apply in all circumstances and can be restricted in some cases.
Other forms of relief are available, such as where disposal proceeds are reinvested in certain approved investments. These could include the enterprise investment scheme (EIS) and the seed enterprise investment scheme (SEIS).
Another valuable relief, with a maximum lifetime tax saving of £100k, is business asset disposal relief (BADR). This can be claimed on the disposal of a qualifying business, shares in a qualifying company or qualifying business assets. There is also investors’ relief which has different qualifying conditions but operates in the same way by reducing the rate of tax which applies on a disposal but with a more generous lifetime allowance.
Liabilities to CGT can arise in unexpected situations, such as the gift of an asset to your children. Without the correct advice, the first you may be aware of a missed liability (or a missed planning opportunity) is a letter on the doormat from HMRC.
Sales of artwork, antique furnishings and other chattels can be subject to CGT, whereas other assets such as cars may be exempt. Before selling anything of value, it is wise to take advice.
RSM can advise you on the tax implications when a transaction is being planned. We can ensure that any necessary action can then be taken before the liability arises and that no planning opportunities are missed. We can also complete any necessary disclosure to HMRC on your tax return, as part of our annual compliance service.
CGT should be considered in conjunction with inheritance tax planning to ensure that reducing a liability to one tax doesn’t generate a higher charge to another. RSM will review your affairs as a whole, looking at the overall picture and your plans for your wealth.
Get in touch with us to discuss how we can help you minimise your liability to CGT.