Capital Gains Tax

Morris Wheeler Churchill are capital gains tax specialists and consultants. When you dispose of an asset – either by selling it or gifting it to someone – the taxable gain is calculated simply by comparing net proceeds with total cost (including costs of acquisition and enhancement expenditure).

The rate of tax depends on your overall income and gains position for 2020/21. Gains will be taxed at 10% to the extent that your taxable income and gains fall within the upper limit of the income tax basic rate band and 20% thereafter.

These CGT rates are increased to 18% and 28% for ‘carried interest’ and gains on residential property.

There are valuable reliefs and exemptions available that can reduce your tax charges. Our tax specialists will ensure we claim all possible reliefs and can advise on tax planning to ensure you pay the least amount of capital gains tax.

Our specialists can advise on the following areas:

• Incorporation of Properties
• Entrepreneurs Relief
• Capital Gains Tax on main Residence
• Substantial Shareholding Exemption and corporate capital gains tax
• Corporate reconstructions and demergers

If you are planning on disposing of your business or other assets, then our capital gains tax consultants can provide pre-transaction tax advice which can help you save a significant amount of capital gains tax.

Entrepreneurs’ Relief, is available for those in business, which may reduce the tax rate on the first £1 million of qualifying lifetime gains to 10%. This is targeted at working directors and employees who own at least 5% of the ordinary share capital of the company and the owners of unincorporated businesses.

The relief is available to individuals on the disposal after two complete qualifying years of:

• all or part of a trading business carried on alone or in partnership
• the assets of a trading business after cessation
• shares in the individual’s ‘personal’ trading company
• assets owned by the individual used by the individual’s personal trading company or trading partnership where the disposal is associated with a qualifying disposal of shares or partnership interest.

5% rules for company shareholders

To qualify for ER, the company needs to be an individual’s personal company where the individual must:

• be a company employee or office holder
• hold at least 5% of the company’s ordinary share capital and be able to exercise at least 5% of the voting rights.

They must also satisfy one of the following tests:

• a distribution test – an individual is entitled to at least 5% of the company’s profit available for distribution to equity holders and 5% of the assets available for distribution to equity holders in a winding up;

or

• a proceeds test – an individual is entitled to at least 5% of the proceeds in the event of a disposal of the whole of the ordinary share capital of the company.

All planned transactions require careful scrutiny to ensure that the available Entrepreneurs’ Relief is maximised. Remember to keep us in the picture – we are best placed to help and advise if you involve us at an early stage.

If you are considering selling an asset and are worried about the capital gains tax consequences and any possible options to mitigate your tax liability, then contact our office on 01279 464400 and ask for a tax specialist.