The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald and the Llanelli Herald
The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald and the Llanelli Herald.
By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
Being thorough comes as second nature to us chartered accountants. Which is why the Money Matters column is continuing to dissect the Government’s most recent Budget changes.
This week, we take a look at the complicated world of Capital Taxes.
Here are some of the key areas where the Government has taken action –
Capital gains tax (CGT) rates
The current rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter.
The government is to reduce the higher rate of CGT from 28% to 20% and the basic rate from 18% to 10%.
The trust CGT rate will also reduce from 28% to 20%. The 28% and 18% rates will continue to apply for carried interest and for chargeable gains on residential property that do not qualify for private residence relief.
In addition, the 28% rate still applies for ATED related chargeable gains accruing to any person (principally companies).
These changes will take effect for disposals made on or after 6 April 2016.
The rate for disposals qualifying for Entrepreneurs’ Relief (ER) remains at 10% with a lifetime limit of £10 million for each individual.
Here’s an example for the year 2016/17
Annie, a higher rate taxpayer, has the following chargeable gains after the annual exemption:
Gains eligible for ER £100,000
A residential property gain £30,000
Other gains £10,000
The ER gain is taxable at 10%. The residential property gain will be taxed at 28% and other gains at 20%.
Goodwill on Incorporation and ER
New rules were introduced from 3 December 2014 which prevent individuals from claiming ER on disposals of goodwill when they transfer their business to a related company in which they, or a member of their family, held any shares whatsoever.
This means that CGT became payable on the gain at the normal rates of 18% or 28% rather than 10%.
Revised legislation will be introduced in Finance Bill 2016 to allow ER to be claimed in respect of gains on goodwill where the individual holds less than 5% of the shares, and less than 5% of the voting power, in the acquiring company.
Relief will also be due where an individual holds 5% or more of the shares or voting power if the transfer of the business to the company is part of arrangements for the company to be sold to a new, independent owner.
This measure will have backdated effect and will therefore apply to disposals on or after 3 December 2014.
Associated disposals and ER
New rules were introduced in 2015 which were aimed at combatting abuse of ER.
Whilst preventing the abuse, those rules also resulted in relief not being due on ‘associated disposals’ when a business was sold to members of the claimant’s family under normal succession arrangements.
Certain revisions are to be made so that ER will be allowed on a disposal of a privately-held asset when the accompanying disposal of business assets is to a family member.
In addition, under the 2015 rules an associated disposal can only qualify for ER if there is also a material disposal of 5% or more of the claimant’s share in a partnership or holding in a company.
Under the proposals this is not to apply where the claimant disposes of the whole of his interest and has previously held a larger stake.
These changes will have a backdated effect for associated disposals made on or after 18 March 2015.
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) -
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