Accumulating shares are additional ordinary shares issued to existing shareholders in lieu of a dividend. They serve as an alternative to annual income by fostering capital growth, thereby avoiding income tax but not capital gains tax.
An allowable capital loss refers to the loss that an investor or taxpayer sustains from the sale or exchange of a capital asset, which the IRS permits to be deducted against capital gains when computing taxes.
Bed and Breakfasting refers to a tax strategy where a shareholder sells a holding and buys it back the next day to realize a loss for tax purposes. However, legislative changes have rendered this practice obsolete for shares due to stricter time requirements.
An in-depth exploration of how business assets are treated under capital gains tax, specifically in relation to entrepreneurs' relief and the historical context of taper relief.
A capital gain represents the profit realized from the sale of an asset where the selling price exceeds the original purchasing price. This gain is often subject to capital gains tax, depending on the jurisdiction and applicable legal provisions.
Capital Gains Tax (CGT) is a tax on the profit realized from the sale of certain types of assets, occurring at different rates depending on asset type and overall taxable income. This tax plays a significant role in tax planning for investors and businesses.
Capital Gains Tax (CGT) is a tax levied on the profit from the sale of assets or investments. The tax applies to the difference between the sale price and the original purchase price or basis of the asset.
A chargeable event refers to any transaction or occurrence that results in a liability for income tax, capital gains tax, or corporation tax.
In the context of capital gains tax, a chargeable person is any individual or entity that is resident, or ordinarily resident, in the UK during the year in which a chargeable gain was made due to the disposal of an asset.
An exemption from capital gains tax that applies to gains from the disposal of chattels, which are items of movable personal property, provided their value is less than £6,000. It does not apply to wasting assets.
Clearance is an indication from a taxing authority that a certain provision does not apply to a particular transaction. This procedure is only available when specified by statute and can significantly impact tax liabilities and treatment of specific transactions.
Consideration is a fundamental element in a contract representing the exchange of promises or monetary value essential to legal agreements.
A deed by which the beneficiary under a will or an intestacy redirects the gift to some other person (who may or may not be a beneficiary of the estate). Provided this is done within two years of the deceased's death and statutory requirements are complied with, the redirection is not treated as a gift for inheritance tax or capital gains tax purposes.
A Delayed Exchange, also known as a Section 1031 Exchange or Tax-Free Exchange, allows investors to defer capital gains taxes on the sale of an investment property by reinvesting the proceeds into a similar property within a specified time frame.
An investment scheme in the UK that replaced the Business Expansion Scheme (BES) on 1 January 1994. It helps small higher-risk unlisted trading companies raise capital by offering tax relief to investors.
Entrepreneurs' Relief (ER) is a tax relief scheme introduced on April 6, 2008, in the UK, offering a reduced rate of Capital Gains Tax (CGT) on disposals of qualifying business assets, effectively encouraging entrepreneurial activities.
A formal claim made by a taxpayer due to an overpayment of tax, often resulting from an error or mistake in a tax return or statement. Must be filed within six years.
In the UK, General Commissioners are an unpaid local body of reputable individuals appointed to hear appeals against income tax, corporation tax, and capital gains tax assessments or related disputes.
Independent taxation is a system of personal taxation in which married women are treated as completely separate and independent taxpayers for both income tax and capital gains tax.
Indexation is the practice of adjusting the chargeable gain from the sale of an asset to take account of inflation over the period of ownership, and the policy of connecting economic variables like wages, taxes, and pensions to rises in the general price level.
A tax-advantaged savings account available in the UK that allows individuals to save or invest a certain amount per year without paying personal income tax or capital gains tax on the earnings.
A like-kind exchange, also known as a tax-free exchange, is a transaction or series of transactions that allow for the deferral of capital gains tax if certain conditions are met.
An asset of little or no value, often used for capital gains tax purposes. Such assets can be treated as sold and immediately reacquired at a negligible value, resulting in an allowable capital loss.
In the UK Capital Gains Tax rules, an individual 'ordinarily resident' is subject to the tax even if they are not actually living within the UK. This status applies to various scenarios such as imprisonment abroad or taking a gap year.
A principal private residence (PPR) refers to an individual's main private dwelling house where they typically reside the majority of the time. Gains arising from the sale of a PPR are usually exempt from capital gains tax (CGT).
The recapture of depreciation is a tax provision that allows the IRS to tax the portion of gains on the sale of property that represents 'excess' depreciation.
The remittance basis is a UK tax rule affecting individuals who are resident but not domiciled in the UK. It allows them to limit their UK tax liability on foreign income and gains only when these are brought into the UK.
A resident is an individual or company that is considered to be based in the UK for taxation purposes, determined by specific criteria set by HM Revenue and Customs (HMRC).
Rollover relief allows businesses to defer capital gains tax or corporation tax when proceeds from a disposable asset are reinvested, thus potentially increasing any gains from future asset disposals.
A system that enables taxpayers to assess their own income tax and capital gains tax liabilities for the year. Since 1996-97, self-assessment has become a significant component of the UK tax return system, encapsulating details on taxable income, chargeable gains, and claims for personal allowances.
An approved share option scheme established by an employer for the benefit of executives or other employees. HM Customs and Revenue has detailed rules regarding the income tax and capital gains tax chargeable to individuals benefiting from such a scheme.
The place in which an asset is held to be located, determining the applicable laws for rights and liabilities associated with the asset.
A body of specialized tax lawyers appointed to hear appeals against assessments to various taxes, including income tax, corporation tax, capital gains tax, and inheritance tax.
Taper Relief was a tax relief mechanism used in the U.K. to reduce the amount of Capital Gains Tax (CGT) payable on the disposal of assets, provided these assets were held for a certain period. It was replaced by Entrepreneurs' Relief in 2008.
A Tax Deposit Certificate is issued by HM Revenue and Customs (HMRC) to a taxpayer who has made an advance payment for future liabilities such as income tax, capital-gains tax, or inheritance tax. It offers an interest-bearing option for managing tax obligations efficiently.
Tax relief is a reduction in the amount of tax that an individual or corporation owes to the government, typically through various statutory provisions. In the UK, tax relief can be applied to income tax, capital gains tax, and inheritance tax through different mechanisms such as allowances, exemptions, and credits.
A levy imposed on individuals and corporate bodies by central or local governments to finance government expenditures and implement fiscal policies, excluding payments for specific services rendered.
The UK legislation consolidating the law relating to the administration and collection of income tax, corporation tax, and capital gains tax.
Trade, particularly in the context of income tax, refers to activities or transactions that could be subject to income tax charges as opposed to capital gains tax. Determining whether an activity is classified as a 'trade' involves evaluating various factors or 'badges of trade'.
An investment fund that pools resources from multiple investors to purchase a diversified portfolio of securities, managed either as an actively traded or static investment portfolio.
Venture Capital Trusts (VCTs) offer a high-risk, high-reward investment avenue that provides risk capital for smaller unlisted trading companies, with the added advantage of certain tax benefits in the UK.
