ABSTRACT
Capital gains tax is charged on the chargeable gain accruing to a person (other than a company) on the disposal of an asset during a year of assessment.
A chargeable gain means a gain accruing on the disposal of an asset on or after 6 April 1982. The underlying notion is that gains accruing to a taxpayer before 6 April 1982 are exempt from capital gains tax. A chargeable gain (or allowable loss) is the difference between the disposal proceeds (actual and notional) as reduced by the aggregate of the cost of acquisition of the asset (including incidental costs of acquisition and disposal), the cost of improvement which is reflected in the asset at the time of disposal and indexation allowance up to 5 April 1998. For disposals after 5 April 1998 by individuals, trustees and personal representatives (PRs), indexation relief has been replaced by a taper relief which reduces the amount of the chargeable gains the longer the asset is held after that date, with a greater reduction for business assets: see s 2(A) of the Taxation of Chargeable Gains Tax Act 1992 (TCGA) (introduced by s 121 of the Finance Act 1998 (FA)). There is generally no tax advantage in holding an asset longer than 10 years, since the taper relief does not increase after this point. Taper relief is based on the size of the gain and the length of time an asset has been held. The relief ignores the amount of the initial investment. In assessing the chargeable gain eligible for taper relief on a disposal after 5 April 1998, the cost taken is the indexed cost up to 1 April 1998.
