SLATERS CHARTERED ACCOUNTANTS

162A London Road
 Chesterton
Newcastle Under Lyme
Staffordshire
ST5 7JB
Tel: 01782 566101 Fax: 01782 566090

Capital Gains Tax

 
The government has announced plans to radically change the system of Capital Gains Tax (CGT) from 6 April 2008. The changes include:
  • abolishing taper relief and indexation
  • introducing a flat rate of CGT of 18% and
  • proposals to introduce an entrepreneurs’ relief giving a 10% tax rate on the first £1million of qualifying gains.

Annual exemption

The first £9,200 of gains made in 2007/08 are CGT-free being covered by the annual exemption. Note that husband and wife both have their own annual exemption, as indeed do children. A transfer of assets between spouses may enable them to utilise their annual exemptions. Consider selling assets standing at a gain before the end of the tax year on 5 April to use the annual exemption. Bed and breakfasting (sale and re-purchase overnight) of shares is no longer tax effective but there are two variants which still work:

  • sale by one spouse and repurchase by the other
  • sale followed by repurchase via an ISA.

These techniques may also be used to establish a loss that can be set against gains. The timing of such disposals may be critical because losses are used against gains before applying taper relief (up to 5 April 2008).

Two homes?

If you have two homes then consider making an election so that future gains on your ‘main residence’ are exempt from CGT. Talk to us if this is relevant for you.

Other ideas

A capital gain can be deferred if the gain is reinvested in the shares of a qualifying unquoted trading company via the Enterprise Investment Scheme.

A capital loss can be claimed on an asset that is virtually worthless. Where the asset is of ‘negligible value’ by 5 April 2008 the capital loss can be used in 2007/08.

Moving abroad can take you outside the CGT net. However it is clearly not a decision to be taken lightly and requires very careful planning. Please talk to us if this is an area of interest for you.

No CGT planning should be undertaken in isolation. Other tax and non-tax factors may be relevant, particularly inheritance tax in relation to capital assets.

The CGT rules are about to change significantly from April 2008. Please talk to us soon if there are any issues in relation to CGT planning you wish to discuss.

All employers with at least 50 employees must file their end of year returns electronically. Employers with fewer than 50 employees do not have to start online filing until 2009/10 but there are tax-free incentives for early take up. Large employers (those with at least 250 employees) must also pay their PAYE electronically.

Talk to us if you are interested in using a PAYE settlement agreement to account for the tax due on minor employee benefits. It can reduce administrative hassle and save time!




 

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