Taxation of Capital Gains – Capital Assets and Stock in Trade
Before 1962 a capital gain was generally free from taxation. In the Finance Act 1962 provisions were introduced to treat gains made in a short period, normally one year but three years for land, as income to be taxed accordingly. The Finance Act 1965 introduced a comprehensive system for the the taxation of long-term capital gains and the 1962 Act provisions were abolished finally in 1971. Thus, since 1965 there has existed a scheme for the taxation of capital gains, by which is meant gains realised when a capital asset is disposed of and the proceeds exceed the costs incurred in acquiring the asset.
These provisions apply to assets of a capital nature. In the case of property these would be the land and buildings owned by a person or company which they occupy or let as an investment. It is important to note that in some instances such property will not be regarded as capital but as stock in trade which is not subject to the provisions applicable to capital gains.