Question

1. Discuss the Capital Gains reliefs available is-

1. The Asset is Damaged
2. The Assets is Destroyed

iii. The Asset is Replacement of a Business Asset

(150 words)

TAXATION

Answer 1

capital gain tax is charged when there is chargeable disposal of a chargeable asset by a chargeable person.a chargeable disposal includes part disposals and the gift of assets. however, the transfer of an asset upon death is exempt disposal.

i) in calculating the capital gain, we apply the usual capital gain rules.if an asset is damaged but not destroyed, and compensation is received from insurance claim, a part-disposal for capital gain tax purposes will take place.

if the compensation received is used in full, or in part, to restore the asset. the expenditure will be treated as enhancement expenditure for capital gain tax purposes. enhancement expenditure is deductible when calculating a gain or loss on an eventual sale.

ii)if an asset is destroyed and any insurance claim is received on the destruction of assets them profit or gain arriving from it will be charged under income from capital gains. if no insurance claim received then not taxable.there are many common causes where the destruction is covered.

iii)replacement of business assets. when certain business assets are sold and the consideration is to acqy\uire new business assets,roll-over-relief may, at the election of the taxpayer.be available on any gain made on the disposal. the gain on the disposal is deemed to reduce the consideration for the acquisition of the new asset.when the new asset is sold, tax will be payable on the increased gain(subject to any available relief)the relief in only normally available if the replacement is purchased in the 12-month period preceding the disposal of the old asset.