This guide will help you calculate your capital gains and losses if you sell or otherwise dispose of business assets in the 2011-12 tax year.
Typical business assets include land, buildings, machinery and certain shares.
There are some examples that will help you get your Capital Gains Tax right.
On this page:
You must work out the gain or loss separately for each business asset when you sell, give away, exchange or otherwise dispose of it. This step-by-step guide explains how to do that in straightforward cases.
If you sell or dispose of other types of assets in 2011-12, you must work out each gain or loss separately. Then you can work out your overall gains or losses.
You can find help on working out capital gains on shares, personal possessions and property in the 'More useful links' section below.
The amount received for your business asset is usually the sale price. This is the amount of money you received for the asset when you sold or disposed of it.
However, sometimes you need to use the market value of the asset instead of the sale price. The market value is the price your asset might reasonably have been expected to fetch on a sale in the open market.
You use the market value of the asset instead of the sale price if, for example:
If you sell or transfer a business asset to your husband, wife or civil partner you usually won't have to pay any Capital Gains Tax on that disposal. You must have lived together for at least part of the tax year in which you make the disposal.
This does not apply to other people you're connected with (for example your brother).
This does not apply if you're separated for the whole of the year in which the disposal occurs. You must use the market value of the asset disposed of, at the date of disposal as the amount received.
The cost of your business asset is normally the amount you paid for
it when you bought or acquired it.
However, sometimes you need to use the market value of the asset instead of the cost.
You use the market value of the asset instead of the cost if:
If you received the asset from your husband, wife or civil partner when you were living together, you usually use the amount the asset cost them.
But if your husband, wife or civil partner owned the asset at 31 March 1982 you use the market value on that day instead.
HM Revenue & Customs (HMRC) can check your valuation to help you complete your Self Assessment tax return. To request this complete form CG34 Post Transaction Valuation Check after you've disposed of the asset. Form CG34 contains the address you should send it to.
Please allow at least two months for HMRC to check the valuation.
If you've spent extra money to buy, sell or improve your business asset, you can deduct certain costs.
Costs you can deduct include:
You're self-employed as a butcher.
In June 2000, you bought your shop for £75,000.
In May 2006, you built an extension to the shop that cost £10,000.
In June 2011, you sold the extended shop for £200,000.
From the amount you sold the shop for (£200,000) take away the amount you paid for it (£75,000) along with the cost of the extension (£10,000).
So your gain before applying any reliefs is £115,000 (£200,000 - £75,000 - £10,000).
But if you had sold the shop for £80,000, you would have made a loss of £5,000 instead (£80,000 - £85,000 costs).
If you've worked out that, so far, you've made a gain, there are tax reliefs that may reduce or postpone that gain.
For example, the following reliefs may be available:
Through steps 1 to 5, you've worked out the gain or loss on a business asset and applied reliefs.
If you sell or dispose of other assets in 2011-12, repeat these steps
to work out the separate gain or loss for each asset.
See the 'More useful links' section below for help on:
In most cases:
In July 2011 Mr P made a gain of £50,600 on the sale of land and buildings.
He also sold some shares in August 2011 in his personal trading company making a gain of £20,000.
His total gains for the 2011-12 tax year are £70,600 (£50,600 + £20,000 = £70,600). This is more than the Annual Exempt Amount so he has tax to pay.
Mr P is a higher rate taxpayer, so he pays tax at 28 per cent on gains not qualifying for Entrepreneur’s relief and 10 per cent on qualifying gains.
The £20,000 gain on shares qualifies for Entrepreneur's Relief and is within Mr P's lifetime limit and so is taxed at 10 per cent.
Mr P deducts the Annual Exempt Amount from his remaining gains of £50,600.
As he is a higher rate Income Tax payer, the remaining £40,000 is taxed at 28 per cent.
He must pay Capital Gains Tax of £13,200 (£20,000 at 10% plus £40,000 at 28%).