Avanti Explains: Capital Gains Tax for Companies

Avanti Tax Accountants publishes regular tips that breakdown the complexities of the different types of Tax into easy to understand chunks. This month they are examining Capital Gains Tax for Companies or CGT.

Take a look at the accompanying video (below) to see Victoria Sharp, Managing Director of The Avanti Group (UK) Ltd explain the basic of CGT or take a look at this summary.

A company makes a chargeable gain if it disposes of an ‘asset’ for more than it paid for it. Disposal can include; selling the asset; exchanging it; giving it away or even receiving compensation for damage or destruction. Your total chargeable gains are included in the corporation tax return and taxed along with your business profits, using the same tax rate. Common sources of capital gains are sales of premises, land or investments.

The tax due can be reduced, deferred or eliminated altogether by making use of available allowances, reliefs and exemptions. Company capital gains are based on the difference between the disposal value and the purchase cost (purchase price or market value when you acquired the asset, though special rules apply in some circumstances).

The disposal value might normally be the sale price, but if an asset is not sold at arm’s length (e.g. if you give it away), the disposal value is the market value.

You can deduct any expenses of buying, improving and selling the asset when working out capital gains. You also use an HM Revenue & Customs indexation allowance, which reduces the gain by taking inflation into account.

The rules and regulations around Capital Gains Tax is vast and that is why having the help from an accountant to complete your Capital Gains Tax supplement in the tax return can save you a lot of money with the experience and knowledge, especially with changing rules every year.

The information contained herein is given by way of general guidance only and no action should be taken solely on the basis of the information contained herein. The Avanti Group (UK) Ltd will be pleased to provide further guidance on the issues, and how they might affect you. No liability is accepted by the firm for any action taken without seeking appropriate professional advice.