Capital Gains Tax glossary

a b c d e f g h i l m n o p q r s t u w

a

acquire, to

See acquisition

acquisition

When you acquire an asset. For Capital Gains Tax purposes this could be when you buy, inherit, or receive an asset as a gift, or receive it in exchange for something else. You don't necessarily have to pay money to acquire it.

allowable costs

See costs

allowable losses

You may make a loss when you sell or otherwise dispose of an asset that's liable to Capital Gains Tax. The loss will normally be an allowable loss, providing you claim for it. This is sometimes also called a capital loss.

Losses resulting from tax avoidance schemes may not be allowable losses.

See what to do if you've made a loss

allowance, tax-free

See Annual Exempt Amount

Annual Exempt Amount

This is the annual tax-free allowance you, are usually entitled to each year before you have to pay Capital Gains Tax.

Personal representatives or executors of a deceased person's estate are also entitled to the Annual Exempt Amount. They are entitled to it for the tax year in which someone dies and the next two tax years.

Most trustees are entitled to half the Annual Exempt Amount that individuals are entitled to.

Find out how to use the annual tax-free allowance

arising basis

If you're resident in the UK, you'll normally be taxed on the arising basis.

This means that you'll be liable to pay UK tax when you dispose of an asset - whether the asset is in the UK or abroad.

See also remittance basis and residency

arm's length disposal

When you sell or dispose of an asset at arm's length, it's like a normal commercial transaction. You seek to obtain the best deal, as does the person acquiring the asset from you.

A disposal that's not made at arm's length might be, for example:

  • if you give something away
  • if you deliberately sell an asset to someone for a lower amount - even if they were prepared to pay more

If you sell or otherwise dispose of an asset to a 'connected person', you're treated as if the disposal was not at arm's length.

If you don't dispose of an asset at arm's length, it can affect how much Capital Gains Tax you pay.

See connected person

See more examples of arm's length disposals in the HMRC Capital Gains Tax manual

asset

Assets are things you can own, such as:

  • shares, units in a unit trust and other investments
  • property - including land, buildings and leases
  • business assets, business premises, copyright and 'goodwill' ┬áthe reputation of a business)
  • antiques, jewellery and other personal possessions - known as chattels

See also goodwill and chattels

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b

bed and breakfasting (or 30-day) rule

There's a special rule for deciding which shares you've sold when you buy more shares of the same class in the same company within 30 days of the sale. This is sometimes called the bed and breakfasting rule.

It prevents you making a gain or loss on shares you've sold and bought back almost immediately.

Read more about the bed and breakfasting rule and how to match shares

beneficial ownership

See ownership

bonus issue

A bonus issue is when new free shares are issued by a company. The number of shares issued is in proportion to each person's existing shareholding. It's sometimes also called a scrip issue.

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c

capital gain

You may make a capital gain when you sell or dispose of an asset that's increased in value since you acquired it.

If any amount you receive for the disposal is liable to Income Tax, you won't include that amount when you work out your capital gains or losses.

For example, if you sell an antique as an antiques dealer, you'd include the amount received in working out your Income Tax bill. You wouldn't include it in your Capital Gains Tax calculation too.

capital loss

See allowable losses

capital sum

This is when you get from your asset:

  • a sum of money
  • something that can be converted into money (money's worth), for example an item you can sell

If you're liable to Income Tax on the sum received, you won't be liable to Capital Gains Tax on it too.

See more on capital sums in the Capital Gains Tax manual

cash call

See rights issue

chargeable asset

A chargeable asset is an asset that may be liable to Capital Gains Tax when you sell or dispose of it.

chargeable gains

Your chargeable gains are your gains on assets that are liable to Capital Gains Tax before you deduct:

  • allowable losses
  • the annual tax-free amount (the Annual Exempt Amount)

See also taxable gains and Annual Exempt Amount

chattels

Chattel is a legal term for an asset that is tangible, you can touch and move it. Your personal possessions might be chattels.

Examples include:

  • household furniture and furnishings
  • paintings, antiques, crockery and china, plate and silverware
  • for businesses - plant and machinery not permanently fixed to a building

Find out about Capital Gains Tax on personal possessions

connected people

See connected person

connected person

A connected person could be, for example:

  • your husband, wife or civil partner
  • your brothers, sisters, parents, grandparents, children, grandchildren and their husbands, wives or civil partners
  • the brothers, sisters, parents, grandparents, children, grandchildren of your husband, wife or civil partner - and their husbands, wives or civil partners
  • certain trustees
  • a company you control

costs

For Capital Gains Tax purposes, you deduct your costs to work out the gain or loss on the sale or disposal of an asset. Only some costs are allowable.

Allowable costs may include:

  • the price paid to acquire the asset
  • the costs of any improvements made to your assets
  • incidental costs of acquiring or disposing of the asset - such as Stamp Duty or Stamp Duty Land Tax

Sometimes you use the market value of the asset instead of the actual cost - for example, if you received the asset as a gift.

See market value

How to work out your gain or loss

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d

disposal

You usually dispose of an asset when you stop owning it. For example, if you:

  • sell it
  • give it away
  • transfer it
  • exchange it for something else

For Capital Gains Tax purposes, a disposal includes a part-disposal. For example, you may have disposed of a part share in a house you inherited or you may have sold half of your collection of antique furniture.

Sometimes you're treated as having disposed of all or part of an asset even though you still own it - so you're deemed to have disposed of it. For example when you:

  • receive an insurance payout for a damaged asset
  • make a claim that an asset has become worthless (known as a negligible value claim)

See examples of disposals in the HMRC Capital Gains Tax Manual

See examples of deemed disposals in the HMRC Capital Gains Tax Manual

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dispose, of

See disposal

domicile

Everyone has a country of domicile. You can only have one country of domicile at a time.

You're normally domiciled in the country where you have your permanent home, but factors such as your country of origin can affect your domicile too.

If you don't have foreign gains, your domicile status doesn't matter for Capital Gains Tax purposes.

If you're domiciled in the UK and resident in the UK, you're taxable on gains you make in the UK and abroad.

See also non-domicile, residency

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e

election, make an

You make an election when you specifically choose to have your gains or losses worked out in one way instead of another for Capital Gains Tax purposes.

You would make an election by writing to HM Revenue and Customs.

expenses

See costs

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f

furnished holiday lettings

Providing certain conditions are met, the commercial letting of furnished holiday accommodation in the UK or in the European Economic Area is treated as a trade.

For more information about the conditions go to Helpsheet253

This means that you can claim some Capital Gains Tax reliefs that are normally associated with business assets. For example:

  • Business Asset Roll-Over Relief
  • Gifts Hold-Over Relief
  • Entrepreneurs' Relief

See more on furnished holiday lettings in the Self Assessment tax return notes (PDF 832K)

Find out more about Capital Gains Tax reliefs for business assets

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g

gilt-edged securities

See gilts

gilts

Gilts are a type of investment issued by the UK Government. They are in sterling. They are usually either Premium Bonds or investments that pay a fixed rate of interest and have a date when they end or mature. Gilts are sometimes called gilt-edged securities or UK government gilts. Gains on the disposal of gilt-edged securities are exempt from Capital Gains Tax. Any loss on the disposal would not be an allowable loss.

goodwill

Goodwill, includes the reputation, good name and relationships that a business has built up over the years it has been operating.

Goodwill can have a monetary value placed on it. If you sell all or part of your business as a going concern, you need to include the value of the goodwill when you work out your gain or loss.

See more on goodwill in the Capital Gains Tax manual

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h

holding company

A holding company is usually a company that does not produce goods or provide services itself, other than perhaps to its own group members. Its main purpose is holding shares in other companies that it owns. It's often the principal company in a group, with a 50 per cent or more shareholding in each of its subsidiary companies.

See also trading company

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i

intangible assets

An intangible asset is an asset that you can't touch, move or physically measure.

Some examples are:

  • goodwill - the good name or reputation of a business
  • intellectual property rights - patents, trade secrets and copyrights

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l

legal ownership

See ownership

losses

See allowable losses

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m

market value

This is the price your asset might reasonably be expected to fetch on the open market.

See when to use market value when working out your gain or loss

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n

negligible value claim

If you own shares that become worthless, or almost worthless, you may be able to make a Negligible Value Claim. You can then work out your loss as if you'd sold the shares for their negligible value.

Download the latest helpsheet on Negligible Value Claims - Helpsheet 286 (PDF 80K)

non-domicile

If you're not domiciled in the UK - known as non-domiciled - it can affect your tax treatment. Every case is different, but your domicile may be affected by factors such as:

  • where you were born
  • your plans to live permanently in a country
  • where your father was born
  • whether you've lived abroad

To find out more, please download the guide below. There are some flowcharts on page 28 that may help you decide your domicile status.

If you're non-domiciled in the UK, you may wish to use the remittance basis of tax, which affects how your worldwide assets are taxed.

See also remittance basis

RDR1 - Residence, domicile and the remittance basis

Use the Tax Residence Indicator to check whether you are considered to be resident in the UK for the purposes of Income Tax and Capital Gains Tax.

Tax Residence Indicator

non-resident

If you don't meet the conditions for residency, you're described as non-resident.

If your normal home is outside the UK and you are in the UK for fewer than 183 days in the tax year you may be non-resident. Many other factors need to be taken into account, for example your lifestyle and connections with the UK.

Your residency status can affect your tax liability. If you're non-resident in the UK, you'll still have to work out the gain or loss on most assets you sell or dispose of in the UK. You may not get the same tax allowances as someone who is resident in the UK.

See also residency

Download guidance on how your residency status affects your taxes

o

ownership

There are two types of ownership:

  • legal ownership - where the legal owner's name is usually on the ownership papers
  • beneficial ownership - where the person who actually benefits from the asset is the true owner

The beneficial owner is usually the one who's liable to Capital Gains Tax.

Example 1

The deeds to a second home are in the husband's name. He is the legal owner, but both he and his wife may be entitled to the profits from the sale of the house. They are therefore joint beneficial owners and jointly liable to Capital Gains Tax.

Example 2

Assets are held in a bare trust. The trustee is the legal owner. The beneficiary of the trust is the beneficial owner and is therefore the one who is liable to Capital Gains Tax.

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p

personal company

A personal company is a term used to describe a company that you have a certain level of control in.

The term helps to define whether an asset is classed as a business asset for Capital Gains Tax relief purposes. One of the criteria may be that the shares are in a personal company.

For Gift Hold-Over Relief and Taper Relief a personal company is one where you have at least 5 per cent of the voting rights.

For Entrepreneurs' Relief a personal company is one where you own at least 5 per cent of the ordinary share capital and that gives you at least 5 per cent of the voting rights.

See more about Gift Hold-Over Relief

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q

qualifying corporate bonds

A qualifying corporate bond (QCB) is a corporate bond that meets certain qualifying conditions. Any profit on the sale or disposal of a QCB is exempt from Capital Gains Tax and any loss is not an allowable loss.

Corporate bonds are issued by a company when it wishes to raise capital. By buying the bond, you're loaning money to the company that must be repaid by a set date.

Most sterling bonds, securities, debentures, loan notes and loan stock are qualifying corporate bonds.

You may be able to use Extel, the Financial Times or other publications to check if your bonds are classed as qualifying corporate bonds. Or you may find guidance in the paperwork that came with your corporate bonds when you first got them.

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r

remittance basis

If you're resident but non-domiciled in the UK, you can choose one of two ways of taxing your capital gains:

  • the arising basis - you're liable to pay UK tax when you dispose of an asset in the UK or abroad
  • the remittance basis - you're liable to pay UK tax on gains that arise in the UK and foreign gains brought into - remitted to - the UK

Please see the link below to find out more about:

  • residency and domicile - and how they're worked out
  • how the remittance basis affects your income or gains from outside the UK

RDR1 - Residence, domicile and the remittance basis

Use the Tax Residence Indicator to check whether you are considered to be resident in the UK for the purposes of Income Tax and Capital Gains Tax.

Tax Residence Indicator

residency

Your residency status in each tax year can affect your tax liability. A new statutory residence test comes into affect from 6 April 2013.

Use the Tax Residence Indicator to check whether you are considered to be resident in the UK for the purposes of Income Tax and Capital Gains Tax.

Tax Residence Indicator

See non-domicile

Download guidance on residency and domicile and the tax implications (PDF561K)

resident

See residency

rights issue

A rights issue is when a company gives existing shareholders the right to buy extra shares. The number of shares offered is in proportion to each person's existing shareholding. It's also sometimes called a cash call.

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s

same day rule

There's a special rule for deciding which shares you've sold when you buy more shares of the same class in the same company on the same day. This is often called the same day rule.

It prevents you making a gain or loss on shares you've sold and bought on the same day.

Find out more about the same day rule in our guide to finding out the cost of your shares

scrip issue

See bonus issue

securities

A security is an asset that, broadly speaking, has a financial value that is negotiable and is interchangeable with other similar assets. They're usually assets such as stocks and bonds. You're given a certificate - or there's electronic evidence - that shows you're the owner.

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t

taxable gains or taxable amount

Your taxable gains or taxable amount' for the year is the amount of your total gains that is liable to Capital Gains Tax:

  • after you deduct allowable losses and reliefs
  • before you deduct the annual tax-free amount - the Annual Exempt Amount

See also Annual Exempt Amount

trading company, trading group and trading activities

Trading company, trading group and trading activities are terms used to help define whether an asset is classed as a business asset for some types of Capital Gains Tax reliefs. These include Gift Hold-Over Relief and Entrepreneurs' Relief.

You'll find detailed explanations of each term in the Capital Gains Tax manual - see the link below.

Find detailed explanations in the Capital Gains Tax manual

Find out more about reliefs on business assets

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u

UK government gilts

See gilts

UK resident

See residency

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w

wasting asset

A wasting asset has a predictable life of 50 years or less.

All plant and machinery are treated as wasting assets.

When you sell a wasting asset, there may be some restriction of the costs you can deduct in calculating your gain or loss.

Personal possessions may be exempt from Capital Gains Tax if they are wasting assets.

Find out more about Capital Gains Tax on personal possessions