Renuciation of an asset as a disposal
The term renounce in this context would mean to repudiate or decline.
Say, for example, you are offered an asset and decline the offer, for whatever reason, (pride, you feel you are not deserving of it). This should not trigger a disposal.
It is considered that in order for a CGT event to arise in this respect, the taxpayer would have to renounce his rights to that asset once he has the rights to that asset. This could
happen, for instance, where a legatee has been bequeathed an asset under a will and repudiates that asset. It is quite likely that in most cases, the CGT consequences will be mimimal, as assets are transferred to
legatees at the market value upon date of death, (there could of course have been a change in value in the interim period). The same could not be said of spouses. In this case the base cost of assets tranferred to
the surviving spouses is the same as that that applied to the deceased during his or her lifetime.
It is most likely that the donations tax will far outweigh the CGT.
Scrapping of asset as disposal
This form of disposal may or may not trigger a CGT liability, depending upon whether or not proceeds were received. In this regard an insurance payout would constitute proceeds
as would proceeds received upon the sale of the scrapped asset.
In this latter context, there are sometimes (favourable) income tax consequences. Assets such as plant and machinery used by a taxpayer in the course of its trade, usually, but not
always, qualify for a scrapping allowance. This allowance usually equates to the quantum of the remaining tax value of that asset, after acounting for any proceeds recieved. Where this happens it is likely
that the base cost of the asset will be reduced to zero, thereby resulting in no capital loss.
The vesting of a trust asset as a disposal
The CGT treatment of trusts, settlors, donors and beneficiaries is highly complex and not for the faint-hearted.
Briefly, assets of a trust may vest in a beneficiary in a number of ways, for example - after a period of time; at the discretion of the trustee and so on. Assets may also vest in a
beneficiary but retained in the trust. It is upon the vesting of the asset in a beneficiary that triggers a CGT event. The subsequent delivery of that asset to the beneficary is an event that is specifically excluded from disposals.
Distribution of company assets as disposals
This should come as no surprise as it involves a change of ownership. A sizeable portion of the CGT legislation is dedicated to company distributions.
The income tax and possibly secondary tax on companies (STC) consequences are likely to be more significant that the CGT effects.
Options as disposals of assets
The creation of an asset, the first topic dealt with on this page, constitutes a disposal. An option falls into this category, however, the CGT legislation specifically caters for not only the creation, (or “granting”), of an option, but the renewal, extension or exercise of an option. Any of these events are regarded as disposals.
Options may be granted over almost any type of asset. But it is not the underlying asset itself to which this part of the legislation refers. Rather, the granting of an option is
itself the asset and it is the act of granting that option that constitutes a disposal on the part of the grantor.