Exemptions & Reliefs for UK Capital Gains Tax

Main exemptions

Gains on certain assets are exempt (and losses not allowable).

• An individual’s or married couple’s only or main residence.
• Certain works of art, historic buildings and their maintenance funds, decorations for valour, private motor cars.
• Enterprise investment scheme and venture capital trust shares.
• Shares issued after 18 March 1986 under the Business Expansion Scheme.
• Government securities, loan stocks, qualifying corporate bonds and national savings certificates.
• Individual savings account and personal equity plan investments.
• Life assurance policies disposed of by their original owner, foreign currency for personal expenditure.
• Betting and lottery wins and compensation or damages for personal wrong or injury.
• Assets transferred to charities or to trustees for the benefit of employees.

Other main reliefs

Retirement relief may be available where an individual aged at least 50 or retiring on grounds of ill-health disposes of qualifying business assets. These include an employee’s shareholding of 5% or more in their employing company.

Maximum relief may be available where the individual has qualified for the previous ten years. In 2001/02, the relief is limited to the first £100,000 of gains with 50% relief on the next £300,000 of gains. Retirement relief is given before business assets taper relief. In subsequent years, the relief is being phased out as follows:

The disposal of tangible moveable property (chattels) is exempt from CGT provided that the consideration is not more than £6,000. Otherwise, the chargeable gain is the lesser of the actual gain or five-thirds of the difference between £6,000 and the consideration. The disposal of chattels with a predictable life of less than 50 years is exempt from CGT provided the asset did not qualify for capital allowances.

Reinvestment relief is available on all chargeable gains made by individuals who reinvest the gain in shares eligible for the enterprise investment scheme (even if income tax relief is not given) or shares in a venture capital trust. All or part of the gain (depending on the amount reinvested) is deferred until the shares are sold, subject to certain qualifying conditions being met.

Roll-over relief may be available when disposing of a qualifying business asset and acquiring another qualifying business asset. All or part of the chargeable gain is postponed until the replacement asset is disposed of without being replaced.

CGT on gifts of certain assets may be held over, ie the gain is postponed until the recipient disposes of the asset. These include: assets used in a business; shares in the transferor’s family trading company (except when the gift is to another company), and assets owned by the transferor and used in the company’s trade; certain agricultural property; and transfers which are not potentially exempt for IHT purposes (eg to discretionary trusts).

Residence and domicile status

Individuals who are resident or ordinarily resident in the UK are liable to CGT on gains from disposing of assets wherever situated. Individuals who are neither resident nor ordinarily resident are not normally liable to CGT unless they are temporary non-residents.

• UK resident individuals who are resident and ordinarily resident outside the UK for less than five tax years starting after 16 March 1998 are normally liable to CGT on their return to the UK on disposals abroad of assets acquired before their departure (re-entry charge).
• There is no re-entry charge for individuals who were not resident and not ordinarily resident in the UK for four of the seven tax years before the year of departure, or in respect of periods of non-residence starting before 17 March 1998.
• Non-UK domiciled individuals who are resident or ordinarily resident in the UK or are temporary non-residents are taxable on non-UK gains only to the extent they are remitted to the UK.