CHAREABLE GAINS 1.docVIP

　　CHARGEABLE GAINS, PART 1 　　 　　This two part article is relevant to candidates sitting Paper F6 (UK) in either the June or December 2014 sittings, and is based on tax legislation as it applies to the tax year 2013-14 (Finance Act 2013). 　　 　　Question 3 of Paper F6 (UK) focuses on chargeable gains in either a personal or a corporate context, and will be for 15 marks. A small element of chargeable gains may also be included in any of the other questions. 　　 　　PERSONAL CHARGEABLE GAINS 　　 　　SCOPE OF CAPITAL GAINS TAX (CGT) 　　 　　CGT is charged when there is a chargeable disposal of a chargeable asset by a chargeable person. 　　 　　A chargeable disposal includes part disposals and the gift of assets. However, the transfer of an asset upon death is an exempt disposal. A person who inherits an asset takes it over at its value at the time of death. 　　 　　Example 1 　　 　　On 19 May 1999 Jorge purchased an acre of land for ￡20,200. He died on 20 June 2013, and the land was inherited by his son, William. On that date the land was valued at ￡71,600. 　　 　　The transfer of the land on Jorge’s death is an exempt disposal. 　　 　　William will take over the land with a base cost of ￡71,600. 　　 　　All forms of property are chargeable assets unless exempted. The most important exempt assets as far as Paper F6 (UK) is concerned are: 　　 　　Certain chattels (see later) 　　 　　Motor cars 　　 　　UK Government securities (Gilts) 　　 　　In determining whether or not an individual is chargeable to CGT it is necessary to consider their residence status. 　　 　　Example 2 　　 　　Explain when a person will be treated as resident in the UK for a particular tax year, and state how a person’s residence status establishes whether or not they are liable to CGT. 　　 　　Subject to not meeting any of the automatic non–resident tests, the following people will be treated as resident: 　　 　　A person who is in the UK for 183 days or more during a tax year. 　　 　　A person whose only home is in the UK. 　　 　　A person who carries ou