Afferro Min Share Discussion Threads

[scorpione] 07/1/2014 19:10

gatehill, do they give you a code number / name for them?

[gatehill] 07/1/2014 18:34

My allocation of the bonds has appeared in my BSL account within the last couple of days. Quoted mid-price of 40p. In view of all the CGT discussions above, thank goodness mine are in an ISA!

[scorpione] 03/1/2014 15:33

no bubble, not yet; I'll update you here when I do.

[bubble pricker] 03/1/2014 14:01

Scorpione, have you received the loan note in your Selftrade ISA yet?

[albertedwin] 03/1/2014 13:09

sham62 - Many thanks indeed for taking the trouble to post the result of your researches so clearly and comprehensively. I have also considered the quoted advice on the HMRC Website and of course the tax observations contained in the Arrangement Document, and am also in agreement with your analysis as to the 3 possible options cited. As with yourself option no.3 is clearly also the most beneficial option to adopt for the purpose of computation of my own CGT in the current tax year. Thereafter whatever the actual return from the Loan Notes turns out to be by the end of the next two tax years I would expect to have ample opportunity to put in hand appropriate steps to mitigate any overall CGT liability having particular regard to the zero base cost brought forward. Whereas any such similar opportunity within the coming final three months of the current tax year is now very limited and circumscribed by dealings already effected in the previous nine months which I suspect may be your situation also.

My only residual query is whether the UK CGT legislation does indeed specifically permit the taxpayer to opt for the option most favourable to himself in such circumstances. I will therefore still need to discuss the overall issue with my Accountant but your valuable comments and clear analysis will now make this task much easier and more specifically directed than hitherto and thus is much appreciated.

[scorpione] 03/1/2014 12:39

Thanks for the ISA info Nick, good news.

[stevie blunder] 03/1/2014 12:18

That is excellent news Nick, thanks for sharing.

[nickdr99] 03/1/2014 11:49

Thanks albert. I am sure in previous take overs ive been involved the companies have provided cgt guidance. Has anyone asked them? I guess its imic now.I've had a response back frim barclays1. They are going to show the loan notes at par value so 40p. (Maybe 0.04p was better... gives my pf a boost that I assume will not transpire in full, as much as I would like another 46p). 2. They say the loan notes can be held in the isa until maturity.

[sham62] 03/1/2014 10:27

AlbertEdwin

I have researched this issue and here is what I have discovered. My comments below are enclosed in parenthesis [].

Please note that I am not qualified to provide advice and that what follows is my personal interpretation of what my research has uncovered.

The following is from the HMRC website and is the most recently published advice I found.




A company carrying out a take-over may issue securities, such as loan notes. Usually you'll receive information about the take-over that explains if they're 'Qualifying Corporate Bonds'.

If the loan notes are Qualifying Corporate Bonds, you work out the gain as if you'd sold your original shares at their market value immediately before the take-over. But the gain isn't chargeable to Capital Gains Tax until you sell or dispose of the Bonds.

If the loan notes aren't Qualifying Corporate Bonds, they're treated in the same way as shares issued in a take-over.

[So the question is are they Qualifying Corporate Bonds or should we treat them the same way as shares?]

The following is taken from the AFF/IMIC Arrangement documentation available on .

CERTAIN UK TAX CONSIDERATIONS

...

Capital gains and chargeable gains

A disposal of Afferro Shares by an Afferro Shareholder who is resident for tax purposes in the UK may, depending on the shareholder's circumstances and subject to any available exemption or relief, give rise to a chargeable gain or an allowable loss for the purposes of capital gains tax and corporation tax on chargeable gains ("CGT").

An individual shareholder who for a period of less than five years either has ceased to be resident for tax purposes in the UK or has become resident in a territory outside the UK for purposes of double taxation relief arrangements and who disposes of the Shares during that period, maybe liable on his or her return to the UK to CGT on any capital gain realized. Nothing in any double taxation relief arrangements prevents such an individual from being subject to CGT in those circumstances.

The proceeds received by holders of Afferro Shares for the purposes of CGT will be the aggregate of the Cash Consideration and the market value of the Convertible Notes on the date when they are issued.

Income tax

Individuals who are resident in the UK for tax purposes and who hold Convertible Notes maybe liable to UK income tax (under Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005) on the profit realized on a disposal of a Convertible Note (whether on redemption, sale or transfer of a Convertible Note or on conversion of a Convertible Note into IMIC Shares). For these purposes the profit realized on disposal is, broadly, the amount by which the proceeds received on disposal of a Convertible Note, or the market value of any IMIC Shares issued on the conversion of a Convertible Note, exceeds the market value of the Convertible Note at the time when it was issued, less certain costs.

Individuals who are resident in the UK for tax purposes may be liable to UK income tax on interest received on Convertible Notes. For individuals, interest is normally taxable in the tax year in which it is received.

[I can see nothing that suggests the Loan Notes are QualifyingCorporate Bonds. So I believe I should treat them the same way as shares in the HMRC advice.]



...

When you sell or dispose of your new shares and work out your Capital Gains Tax, your allowable cost will be the cost of the original shares less the amount of cash received.

If you receive cash that is more than the cost of your original shares, you need to work out your Capital Gains Tax on the amount received. You can do either of the following:

Calculate your Capital Gains Tax in the way described below for 'larger amounts of cash'.
Calculate your Capital Gains Tax on the difference between the cash received and the cost of your original shares. You must elect to do this and it will reduce the cost of your new shares to nil. When you sell or dispose of your new shares you use a cost of nil to work out your Capital Gains Tax.

...

If you receive a larger amount of cash

If you receive shares and more than £3,000 cash, you may owe tax on the cash payment. This also applies if you receive an amount that is equal to or more than 5 per cent of the value of your shares in the original company just before the take-over.

To work out your Capital Gains Tax you need to allocate a 'cost' to this cash payment. You do this by splitting the original cost of the shares proportionally between the cash received and the new shares.

Step 1 - Work out the value of the cash received in proportion to the total value of the cash and shares received.

Step 2 - Split the cost of your original shares between the cash and the new shares in the same proportion as the value.

[I have highlighted what I believe is the key phrase that you can do either of the above.]

[So the options as I see them are

1. Value of cash 80p total value of 88.75p (using last AFF closing price). Apportion allowable costs 90% to cash 10% to loan notes when value realised.
2. Value of cash 80p total value of 120p (using face value of loan notes). Apportion allowable costs 66.66% to cash and 33.33% to loan notes when value realised.
3. Elect to apportion 100% to cash and 0% to loan notes when value realised.]

[I myself am choosing option 3 as this reduces my current years CGT liability when the gains have been larger as against 2 years time when they may not be.]

Steve

[albertedwin] 03/1/2014 08:06

nickdr99 - I do not think AFF or IMIC has issued any direct guidance on valuation of the Loan Notes at issue. This is still my problem for CGT: Do I take my base cost for the Loan Notes as being say 4 pence or should it be one third of my original acquisition cost of the Afferro shares ? speedsgh's Accountant says the latter in the case of a Corporation Taxpayer but there seems to be no authoritative advice as to the corresponding position of a personal taxpayer. Can any one please point me in the right direction on this ? Incidentally as a Certificate Holder neither the cash nor the Loan Notes Certificate have yet been received !

[nickdr99] 02/1/2014 17:58

Loan notes in my Barclays isa and trading account - with a value each of 0.04p (not 4p, or 40p). No idea for the basis of that. Will ask and also about being in the isa.Nuts that the company can't guide on this... Or have I missed that? (Part of the imic shareholder friendly approach)

[scorpione] 02/1/2014 17:37

Seltrade has confirmed that the loan note can be retained in the ISA; has anyone else had experience of this?

[nav_mike] 02/1/2014 14:09

TDWs are still showing my AFF holding but it is marked as 'Assented' with a carrying value of nil. No sign of the loan notes, but at least the cash was paid out.

[stevie blunder] 02/1/2014 13:44

Interestingly they quote a carrying value of £173 for
My holding of 43303 which comes out as 4p each
No idea where that comes from lol!

I don't think there is any trading on market but would love to be corrected

Edit: Make that 0.4p

[taffer87] 02/1/2014 11:07

can you get a quote to sell? any deatils?

[stevie blunder] 02/1/2014 10:00

IMIC Convertible now showing in my ISA at Barclays.

I expect they will have to be moved out before 30 days.

[taffer87] 31/12/2013 07:34

loan notes were going to be posted by 31 Dec..

so expect they will show with brokers by end of next week latest?

[che7win] 27/12/2013 20:20

Loan notes not showing on IWeb either.

[nav_mike] 27/12/2013 18:11

Cash part of the AFF deal is now showing as a pending transaction on my personal and SIPP accounts with TDW, so I guess they are getting there....

No sign of loan notes though

[noirua] 27/12/2013 16:31

TDW, this looks pedestrian and very 1980s. I do believe them, but come on now, Noddy and Big Ears could do better, just with a little run-a-round.

[parthus] 27/12/2013 13:57

Nursey has some nice moves tooooooooooooooooooooooooooooooo... downside...casts a giant shadow on proceedings though.....no fear.. all Afferro inmates are used to the dark side !!!

[nav_mike] 27/12/2013 12:15

TDW now saying there was a discrepancy in the amount of cash/loan notes they received and they hope to have accounts credited 'in the coming week'

Im sure they had a lot of nominee holdings to reconcile, but its damn annoying that they seem to be the only broker with an issue.

Already missed out on some nice little moves on stocks i was watching :(

[knil] 27/12/2013 10:24

oggy
No problem, has a full listing and the risk is well spread.
I think it will do OK over a couple of years.
Have it in my self select ISA.

[oggyrocks] 27/12/2013 07:43

Thanks knil. Had a look and think its what I was looking for. Will be buying some.