Company Subject to CGT Rules
Company’s capital gains and losses are computed in accordance with general Capital Gains principles. The same general capital gains tax rules apply.
There is no exempt amount in respect of capital gains tax for companies. This is in contrast to the position for individuals.
Where capital losses arise they are set against capital gains for the same period. Losses remaining are then carried against capital gains for future accounting periods but cannot be set against other income.
Losses for the accounting period and the previous accounting period brought forward may be deducted from the taxable gains. Total profits for corporation tax purposes are income plus chargeable gains.
Reorganisation Relief
There is relief against Capital Gains Tax in connection with a share reorganisation or take over. There are certain conditions includinga that the only consideration is the issue of shares in the acquiring company. Once the conditions are satisfied, no capital gain arises at the time of the reorganisation.
The cost of the original shares become the cost of the new shares. Where a shareholder receives more than one type of share the cost of the original shares are allocated. Where both cash and shares are received on a take over there is a part disposal of the original shares. Capital Gains arise on the cash element.
Roll over Relief
Roll over relief exists for companies to allow them replace assets used in their trade without incurring a tax liability on the related gains. The gain arising on the disposal of the asset is deducted against the acquisition cost of the new asset. This effectively means that it is postponed for so long as the proceeds are reinvested.
Land and buildings occupied and used for trading purposes and fixed plant and machinery qualify for Roll over relief. The acquisition of a replacement asset must take place within one year before and three years after the sale of the original asset.
Where the proceeds of the old asset are not fully reinvested the surplus retained reduces the amount of the Capital Gain that can be rolled over. Any asset with a predicable life of not more than 60 years is a depreciating asset.
Where the reinvestment is in a depreciating asset the Capital Gain is deferred until the earliest of when the depreciating asset ceases to be used for trading purposes or 10 years since the asset was acquired.
