so include shares held in a qualifying company.

One important area to look at in achieving tax savings is property let for commercial use. Don’t forget that the annual exemption is deducted after taper relief is given. Taper relief seems simple but in reality it is a minefield. The definitions of business assets have changed several times under the various Finance Acts. It is necessary to consider the complete period of ownership to determine which rates apply.

Altho

Capital gains tax taper relief is an extremely powerful form of relief and can result in significant tax savings.Taper relief was introduced from 5 April 1998. It applies only to individuals not companies. This article concerns individuals only, taxation of corporate bodies is dealt with elsewhere.

There are two types of relief, business asset and non business asset.

Capital gains are calculated by deducting the cost of an asset from the net sale proceeds. Cost can include the original cost of the asset, improvement expenditure and an allowance for inflation known as indexation allowance could be added. Indexation allowance only applies up to 1998 when it was replaced by taper relief.

If the asset was owned on or before 31 March 1982 generally the market value at that date can be substituted for original cost.

Thus the gain to be charged to tax comprises net sale proceeds less the indexed amount of the original cost and indexed cost of improvements. There are special rules when assets are transferred between connected persons. Any resulting gain is subject to taper relief.

As a general principle the longer the asset has been held the greater relief available. Business assets attract more relief and accrue faster than non business assets. It is possible to achieve a reduction in the gain up to a maximum of 75% after only 2 years in respect of a business asset. Generally non business assets, once held for more than 2 years attract relief at the rate of 5% for each year held up to a maximum of 40%. If the asset was held on 17 March 1998 a bonus year is added.

As business assets attract more tax relief holding them achieves a greater reduction in liability over a shorter period. Business assets consist of assets used for the purposes of a trade carried on by the taxpayer (alone or in partnership) or by a qualifying company or unconnected unincorporated trader. They also include shares held in a qualifying company.

One important area to look at in achieving tax savings is property let for commercial use. Don’t forget that the annual exemption is deducted after taper relief is given. Taper relief seems simple but in reality it is a minefield. The definitions of business assets have changed several times under the various Finance Acts. It is necessary to consider the complete period of ownership to determine which rates apply.

Althou

can include the original cost of the asset, improvement expenditure and an allowance for inflation known as indexation allowance could be added. Indexation allowance only applies up to 1998 when it was replaced by taper relief.

If the asset was owned on or before 31 March 1982 generally the market value at that date can be substituted for original cost.

Thus the gain to be charged to tax comprises net sale proceeds less the indexed amount of the original cost and indexed cost of improvements. There are special rules when assets are transferred between connected persons. Any resulting gain is subject to taper relief.

As a general principle the longer the asset has been held the greater relief available. Business assets attract more relief and accrue faster than non business assets. It is possible to achieve a reduction in the gain up to a maximum of 75% after only 2 years in respect of a business asset. Generally non business assets, once held for more than 2 years attract relief at the rate of 5% for each year held up to a maximum of 40%. If the asset was held on 17 March 1998 a bonus year is added.

As business assets attract more tax relief holding them achieves a greater reduction in liability over a shorter period. Business assets consist of assets used for the purposes of a trade carried on by the taxpayer (alone or in partnership) or by a qualifying company or unconnected unincorporated trader. They also include shares held in a qualifying company.

One important area to look at in achieving tax savings is property let for commercial use. Don’t forget that the annual exemption is deducted after taper relief is given. Taper relief seems simple but in reality it is a minefield. The definitions of business assets have changed several times under the various Finance Acts. It is necessary to consider the complete period of ownership to determine which rates apply.

Altho

ed cost of improvements. There are special rules when assets are transferred between connected persons. Any resulting gain is subject to taper relief.

As a general principle the longer the asset has been held the greater relief available. Business assets attract more relief and accrue faster than non business assets. It is possible to achieve a reduction in the gain up to a maximum of 75% after only 2 years in respect of a business asset. Generally non business assets, once held for more than 2 years attract relief at the rate of 5% for each year held up to a maximum of 40%. If the asset was held on 17 March 1998 a bonus year is added.

As business assets attract more tax relief holding them achieves a greater reduction in liability over a shorter period. Business assets consist of assets used for the purposes of a trade carried on by the taxpayer (alone or in partnership) or by a qualifying company or unconnected unincorporated trader. They also include shares held in a qualifying company.

One important area to look at in achieving tax savings is property let for commercial use. Don’t forget that the annual exemption is deducted after taper relief is given. Taper relief seems simple but in reality it is a minefield. The definitions of business assets have changed several times under the various Finance Acts. It is necessary to consider the complete period of ownership to determine which rates apply.

Altho

held for more than 2 years attract relief at the rate of 5% for each year held up to a maximum of 40%. If the asset was held on 17 March 1998 a bonus year is added.

As business assets attract more tax relief holding them achieves a greater reduction in liability over a shorter period. Business assets consist of assets used for the purposes of a trade carried on by the taxpayer (alone or in partnership) or by a qualifying company or unconnected unincorporated trader. They also include shares held in a qualifying company.

One important area to look at in achieving tax savings is property let for commercial use. Don’t forget that the annual exemption is deducted after taper relief is given. Taper relief seems simple but in reality it is a minefield. The definitions of business assets have changed several times under the various Finance Acts. It is necessary to consider the complete period of ownership to determine which rates apply.

Altho

so include shares held in a qualifying company.

One important area to look at in achieving tax savings is property let for commercial use. Don’t forget that the annual exemption is deducted after taper relief is given. Taper relief seems simple but in reality it is a minefield. The definitions of business assets have changed several times under the various Finance Acts. It is necessary to consider the complete period of ownership to determine which rates apply.

Although taper relief can provide significant tax savings it needs to be used with extreme care to make sure relief is not under claimed but also to enable maximum advantage to be taken. Like so much of our tax system it is certainly an area worth seeking qualified professional advice in respect of capital gains tax taper relief.