Tag: capital gains tax

Connected persons for tax purposes

by cigma, posted in Capital Gains Tax

Breaking Down Connected Persons for UK Capital Gains Tax

When it comes to Capital Gains Tax (CGT) in the UK, understanding the concept of “connected persons” is essential. However, navigating the statutory definition set out in Section 286 of the Taxation of Chargeable Gains Act (TCGA) 1992 can be complex.

In this article, we’ll provide a clear and comprehensive guide to connected persons for CGT purposes, including insights from HMRC’s internal guidance. If you’re a taxpayer or an investor, it’s crucial to grasp this concept to ensure compliance with the tax regulations and make informed financial decisions.

What are Connected Persons for Capital Gains Tax?

According to Section 286 of the TCGA 1992, a person is considered connected with an individual for CGT purposes if they fall under any of the following categories:

  1. Spouse or Civil Partner: Any person who is legally married to the individual or in a registered civil partnership with them is automatically considered connected.

  2. Relatives: Connection also extends to relatives, including brothers, sisters, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.) and their respective spouses or civil partners.

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Notable Exceptions for connected persons

It’s important to note that the term “relative” does not encompass all family relationships. Specifically, nephews, nieces, uncles, and aunts are not considered connected persons for CGT purposes.

Furthermore, there are certain scenarios where individuals are excluded from being connected persons, as outlined in HMRC’s internal guidance:

  1. Widows/Widowers and Surviving Civil Partners: Unless a connection can be established by means not involving the deceased spouse or civil partner, widows, widowers, and surviving civil partners of deceased persons are not considered connected for CGT.

  2. Dissolution of Civil Partnership or Divorce: Following the dissolution of a civil partnership or a divorce, individuals in addition to the former civil partner or spouse may cease to be connected for CGT purposes.

Need Assistance from an Accountant?

Being aware of who is considered a connected person can impact various transactions, such as property transfers, gifts, or sales, and may result in different tax treatment. To ensure compliance with the tax regulations and make informed financial decisions, seeking guidance from a reputable UK accounting firm with expertise in CGT matters is highly recommended.

If you require professional assistance with understanding connected persons or any other tax-related queries, our team of experienced accountants at CIGMA Accounting is here to help. Contact us today for expert advice tailored to your specific needs.


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private residence relief; london accountant; capital gains tax when selling your home

Private Residence Relief: minimise tax when selling your home

by cigma, posted in Blogs, Capital Gains Tax, FAQ

Private Residence Relief: minimising tax when selling your home

Have you ever considered selling your home? If yes, you’ve probably wondered about the tax implications. Specifically, there might be one tax you’ve heard about: Capital Gains Tax (CGT). In this article, we aim to clarify what this tax is and how Private Residence Relief can potentially protect you from it.

If you need assistance with your tax and accounting, whether it is personal or corporate, CIGMA Accounting is here to help. Visit our Contact Page to set up a free consultation with our CIMA-registered professionals.

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What is Capital Gains Tax (CGT)?

Capital Gains Tax is a tax on the profit or gain you make when you sell or dispose of an asset that has increased in value. This applies to finance assets, investments like art, and company shares. In the context of property, if you sell a house that is not your main home, you may need to pay CGT on the profit you make.

What is Private Residence Relief?

Private Residence Relief, also known as Principal Private Residence Relief (PPR), is a valuable tax relief that can significantly reduce, or even eliminate, CGT when you sell your main family home. This relief recognises that your primary residence should not be subject to the same tax burdens as other investment assets.

Who Qualifies for Private Residence Relief?

There are specific conditions you need to meet for Private Residence Relief. According to the HMRC, the following conditions must be satisfied:

  1. Main Residence: The property must have been your only or main residence throughout the period of ownership.

  2. No Rental: You must not have let out part of the house (having a lodger is not considered letting out a part).

  3. Business Use: No part of your home should have been used exclusively for business purposes. However, using a room as a temporary or occasional office doesn’t count as exclusive business use.

  4. Property Size: The garden or grounds including the buildings on them should not be greater than 5,000 square metres (approximately an acre) in total.

  5. Profit Motive: The property must not have been purchased solely to make a financial gain.

If you meet all these conditions, you may be entitled to full Private Residence Relief on CGT.

Final Period Exemption

Even if you move out of your home, HMRC provides a Final Period Exemption. Under this provision, the last nine months of ownership are disregarded for CGT purposes. This means you might still qualify for Private Residence Relief even if you weren’t living in the property when it was sold. Under certain limited circumstances, this time period can be extended to 36 months.

Private Residence Relief for Married Couples and Civil Partners

It’s important to note that for married couples and civil partners, only one property can be counted as the main home at any one time for the purposes of Private Residence Relief.

In summary, understanding Private Residence Relief can save you significant sums of money when selling your home. However, it’s always wise to consult with a tax advisor or expert who understands your specific circumstances to ensure you maximise any tax relief you are entitled to.

Our CIMA-registered professionals at CIGMA Accounting provide affordable accounting services to clients across the UK and abroad. Get in contact via the form below, or via our Contact Page, to organise a free consultation.


Wimbledon Accountant

165-167 The Broadway

Wimbledon

London

SW19 1NE

Farringdon Accountant

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Farringdon

London

EC1R 3DA