Section 1

Director having a material interest in a company

Owning more than 5% of original share capital

• This can be solely or with relatives

• Can be directly or indirectly

Investor relief

A CGT tax break for outside investors who put money into small trading companies and hold the shares long term

• CGT = 18%

• £1mil lifetime limit

Holdover relief

Don’t pay the CGT now, instead pass the gain to the person receiving a he gift and they pay it later

• Transfers that attract immediate IHT payment qualify for this

Business Rollover relief

Sell a business asset and buy another business asset = delay CGT

It’s seen as reinvesting back into business so CGT is deferred

Reinvestment relief

You make a gain and invest the money back into EIS or SEIS shares = get relief on that gain

Then the gain becomes taxable again when you sell these shares

EIS = Defer the gain

SEIS = 50% of gain can be exempt

CGT info for trusts

• CGT = 24%

• Disposals calculated same as normal

• Annual exemption = £1500 (can be lower if more than 1 trust)

• Trusts for disabled people get full £3000

Business Asset Disposal Relief

If you sell a qualifying business (or shares in one) you can pay a lower CGT on gain at 18%

Can only get this on £1mil of qualifying gains over a lifetime

• If above taxed normally

What qualifies for Business Asset Disposal Relief

You’re a sole trader

• Relevant business assets has to be used for 2 yrs

You own shares in your company

• Own 5%

• An employee

• Trading company

• These conditions satisfied for 2 yrs

Disposal of an asset

Not just selling something

• It’s getting rid of an asset

• Giving up ownership

• Receiving value because something has happened to it

Capital gain = What you receive - What it cost you

Transfer of assets between spouses

It’s a no gain, no loss basis

• No CGT to pay when transfer assets to spouse

• The tax doesn’t go tho the spouse inherits the original cost

Buy £10k shares, now worth £20k - transfer to wife

She later sells them for £25k

Her gain is £25k - £10k = £15k

CGT for Chattels

If value of disposal doesn’t exceed £6000 = No CGT

Per person when married

Private residence relief

The disposal of someone’s private residence is exempt but subject to certain conditions

If a house doesn’t qualify as the main residence = CGT

Private residence absence

What if you don’t live at main residence the whole time

• Might only get part of the gain exempt from CGT

Total gain x (Qualifying period of occupation / total ownership period)

E.g own house for 10 years and made gain of £100k. If only lived there for 8 years

• £100k x 8/10 = £80k exempt

Private residence relief absence criteria

Some periods when you weren’t living at main residence can still count as tho you did

• Final 9 months automatically exempt

• 4 years working somewhere else in Uk

• Any length of time working abroad

All of these are treated as tho the person was living in main residence for that time

Calculation of CGT

Get disposal proceeds

• Actual sale price or market value

Minus original cost

minus any improvement costs

Minus capital losses

• If made a loss on another investment

Minus annual exempt amount

Apply CGT rate

Part disposal

Disposing of part of an asset

(A / A x B) x original cost

A = proceeds of part disposal

B = market value of part retained

Why would you transfer assets to spouse for CGT purposes

They might have;

• Unused Annual exempt amount

• Has capital losses available to offset

• Would pay CGT at a lower rate

CGT on death

No CGT on assets if someone dies

Beneficiaries of estate deemed to have acquired the assets at their market value at death

Not at arms length

When 2 independent people do a normal deal, each trying for a fair price

If the transaction isn’t at Arms length, HMRC may ignore what you actually received and use the assets market value instead

Example

Father gives an asset worth £30k originally bought for £10k to daughter for £5k

• As both parties aren’t trying for a fair deal, it’s not arms length

• Means HMRC will use the original market value (£10k) instead

Deferred consideration

Selling something now but receiving the money later

Ascertainable deferred consideration

• You know exactly how much you’re going to get

• E.g sell an asset for £100k now and £50k later - you know the exact value

• Included in disposal value immediately = CGT on £150k

Unascertainable deferred consideration

• Don’t know how much it will be

• E.g sell business for £100k and 10% of profits next 3 years

• So for CGT you do £100k and what the future payment is estimated now

Class 1 NIC employees thresholds

Primary threshold

• £242 - Level of earnings above employees pay class 1

Secondary threshold

• £96 - Level of earnings above employers have to pay class 1

• Employees over 21

• Apprentices over 25

Lower earnings limit (LEL)

• £129 - the minimum level of earnings needed for employee to be entitled to benefits (state pension contributions)

Upper earnings limit (UEL)

• the max level of earnings an employee must pay NICs at

Employee:

£0 to £242 = No employee NIC

£242 to £967 = 8% employee NIC

Over £967 = 2% employee NIC

Employer:

Over £96 = 15% NIC

Employee’s NICs example

Weekly earnings of £1200

First £242 = 0%

£242 to £967 = 8% = £58

Over £967 = 2% = £4.66

They pay £62.66 employee NICs that week out of their salary

Employee NICs example

Weekly earnings of £1200

First £96 = 0%

Over £96 = 15% = £165.60

The employer pays £165.60 weekly NICs which doesn’t come out of their salary

Marriage allowance

Can transfer 10% of their £12,570 PA (£1257 rounded up to £1260) To their partner

Spouse receiving can’t be above a BRT

It’s an all or nothing transfer (Has to be £1260)

Marginal cost in establishing the benefit in kind

Any personal contributions made against this marginal cost can reduce the taxable amount

Taxable amount = Marginal Cost - Personal contributions

Failure to do tax return fines

If HMRC ask for one even if you know you owe no tax you still have to do it.

• £100 for missing 31 Jan deadline

• Further £900 in total (£10 a day for a maximum of 90 days starting 1 May)

• Further £300 for being 6 months late (starting 1 August)

Total is £1300

Business Asset Disposal Relief

18% CGT applies

Foreign income & gains regime

Must be a UK resident still within first 4 years as a UK tax resident (after having been a non uk resident for at least 10 years)

If eligible don’t have to pay UK tax on their foreign income and gains

• But will lose UK allowances (PSA, Marriage allow, CGT exemptions)

When selling a second property what costs can be offset against any capital gain

Can’t offset any ongoing costs

• Like insurance or anything used to maintain the property

Factors for Taper Relief to be affective

• Donor must have lived 3 years before the gift

• That there is IHT due on the gift itself in isolation (IE the value itself or with a combination of other gifts exceeds the NRB)

Who is due to pay the tax on a investment bond when a chargeable event is triggered

The order is:

• The settlor

• The trustees - If the settlor is not alive

• The UK-based beneficiaries- If no trustee is UK based

Self employed paying income tax

Don’t pay IT automatically like an employee

• instead use self-assessment

Pay in 3 instalments

• 31 January - first payment

• 31 July - Second payment

• 31 January (next year) - any balance outstanding

NICs affect on taxable income

Employee

• Employee NICs are not deducted when calculating tax

E.g - Earn £30k and pay £1.5k in NICs. Tax is calculated on the £30k and not £30k - £1.5k

Employers

• This is the opposite and tax is calculated after NICs taken off

VAT inputs and outputs

VAT = 20%

Inputs - Things the shopkeeper bought

• Paid VAT to suppliers

Outputs - Things the shopkeeper sold

• Collected VAT from customers

VAT input and output question

Outputs - £8k

Inputs - £14k

£8k x 20% = £1600 O

£14k x 20% = £2800 I

£1600 I - £2800 O = -£1200

• Negative number means she paid more VAT than collected

Class 1 NICs

This is the I have a job and receive a salary

Primary class 1

• Employee pays it

• Deducted from salary through PAYE

Secondary class 1

• The NI the employer pays for having an employee

• Paid on top of salary

Helps build entitlement to state pension

Class 2 NICs

Self employed persons NI record

Since 2024 this is no longer paid but still treated as having paid it to protect entitlement to state pension

Profits below £7105 = Don’t have to pay but can voluntarily pay £3.65/week

Profits above £7105 = Pay £0 but are treated as having paid class 2

Profits over £12570 = Still £0 compulsory, but class 4 becomes payable

Class 3 NICs

The fill in the hole voluntarily in my NI record one

Pay this to fill in gaps of years where NI couldn’t be paid

£18.40 weekly

Class 4 NICs

The self employed version of the main NI charge

This charge is fixed to the self employed profits

More profits = more NI to pay

This NIC gives no state pension entitlement

£0 to £12570 = 0%

£12570 to £50270 = 6%

Above £50270 = 2%

3 key criteria for gifts out of normal expenditure

• Must be from income

• Must be regular

• Must not impact stand of living or donor

The Ramsay Principle

Is used to ignore a series of transactions undertaken solely for tax avoidance, determining the transactions’ tax liability by the end result

When is corporation tax due

9 months and 1 day from the end of the company’s accounting period