What is an asset and how can you suffer capital gains tax on ceasing to own it?

An asset is not just something tangible that you own outright, it may be an intangible asset, e.g. goodwill in a company or an option over assets. It can also be something you have an interest in, for example, a leasehold interest in land.

Disposing of an asset doesn’t just refer to the sale of an asset for money. It includes any transfer of ownership by way of exchange, gift or settlement on trustees.

What is the rate of capital gains tax and how can I reduce my capital gains tax liability?

The rate of capital gains tax is currently 33%, so approximately one third of your gain will be paid in tax unless your disposal qualifies for some form of capital gains tax exemption, capital gains tax relief or reduced rate of capital gains tax (e.g. entrepreneur relief at 10%). Clients regularly contact us for capital gains tax advice on:

• Selling their business
• Structuring investments in new businesses
• Mitigating their capital gains tax liability by the efficient use of CGT losses

Identifying the market value of assets

Most transactions, in particular those between connected parties, must be carried out at market value.

We recommend that stakeholders take expert advice from independent valuation experts to determine the appropriate market value to be attributed to a transaction.

While we do not provide valuation services, we can assist the stakeholders source the required expertise.

We help our clients minimise the capital gains tax payable on these transactions by:

• maximising the benefit of tax reliefs, e.g. retirement relief,
• taking full advantage of tax efficiencies, such as:
  • crystallising capital losses to shelter future capital gains,
  • asset transfers to the next generation if assets are currently at low values,
  • restructuring the shareholdings in your business tax efficiently.
  • accessing tax exemptions such as those that apply to certain gains arising on property and disposals of trading subsidiaries.

Our expertise is brought to bear on a wide range of matters to lessen your capital gains tax burden.