Capital Gearing Share Discussion Threads

[miata] 17/6/2011 09:13

Basically yes.

If you completed a Self Assessment tax return for the year in which you made the loss, the time limit for claiming a loss is four years from the end of that tax year. So if you made a loss in 2007-08 you must make the claim by 5 April 2012. If you didn't complete a Self Assessment tax return for the year in which you made the loss, you may have five years.

[boozey] 17/6/2011 06:07

On CGT for Shares. I have made losses on some share dealings over the past several years, but never registered them with the tax office at the time of doing the tax return (silly me maybe). If I now wish to offset up to 5 years losses and the current year tax losses against an exception positive gain on a single transaction can I now use previous years losses of offset this gain at least in part to mitigate against my CGT bill even if those losses were not registered in my tax return in the tax year they were incurred? I am clearly hoping I can still use they regardless of the fact I have not registered them before. Any advice or guidance would be gratefully received. Many thanks.

[miata] 16/6/2011 18:06

I regard the reply by Selftrade as unambiguous (whether correct or not) so it does not need interpretation. Note of course that you need to sell the shares to realise the loss, which I assume you will do in this tax year.

[cwa1] 16/6/2011 18:00

Hello MIATA

I realise that both of you had given(differing) opinions. I just wondered if you agreed on my interpreatation of it SOLELY based on the reply given by Selftrade.

Thanks for the link. Had the quickest of looks but given the 183 pages it might take a while :-(

[miata] 16/6/2011 17:34

Do you agree...?

We have both given our (differing) opinions.

The guidance notes are:



Consider 12.51
"The investments in the repaired ISA lose all tax exemption up to the date of repair, so any interest paid before that date is taxable."

Consider 12.52
Managers should inform investors of

the original cost price, any incidental costs of acquisition and date of
acquisition of investments purchased with invalid subscriptions or transferred to the ISA

Consider 12.53
Managers should advise the investor to report details to his or her tax office of the interest, dividends, chargeable gains and allowable losses and corresponding deficiencies (paragraph 9.45) arising in respect of the void subscriptions for the tax year in which they arose.

Not directly related, but an indicator, to me, re original cost.

[cwa1] 16/6/2011 17:28

Gengulphus, MIATA et al

Re the transfer out of a non qualifying ISA investment and the CGT implications that you very kindly discussed with me just the other day.

I thought I would write to Selftrade themselves and ask if they could give me an answer as to whether or not the transferred out stock would have the original buying price, or the transfer date price, in relation to any CGT calculations and this was the reply:-

In line with HMRC rules, where a security is transferred out of the ISA, no adjustment is made to subscription levels and for Capital Gains Tax purposes the transfer is considered an acquisition at the price prevailing at time of purchase in the ISA.

My bold.

I won't, of course, mention any names but this came from the senior administrator.

So, to my humble eyes, it looks as if I can use the loss accrued since I purchased it ORIGINALLY for the ISA against any profits I have for this calendar year. Do you agree with that solely on the face of the information given to me?

Of course, I realise that you might not agree with what they have said-but I doubt that I could be criticised TOO much for relying on such a categoric statement from my broker if oush came to shove!

I should also state for the record that an additional, unexpected, loss will be most useful for me this year, so I am entirely biased in my views :-)

[daytraders] 16/6/2011 15:57

Ok, i just did that and all results exactly the same either way still like they should be, but will do it that way anyhow.

[david77] 16/6/2011 15:46

Gengulphus is right - use the latest version (2(a) which is 0809tax20.htm) of the prog for both runs with the corrected dates.

[daytraders] 16/6/2011 15:44

Also, ref my post on listed and unlisted shares, i have been told that unlisted means shares that cant be traded like normal, is this correct ? and has nothing to do with recornized stock exchange or not.

[daytraders] 16/6/2011 15:32

Ok, im a bit confised here, so davids 2(a) is the latest version but i have to run that for 1st part of year, and davids 2(b) older version for the later part of the tax year, correct ? i get same numbers for both ways thou, i mean gains and losses come out exactly the same.

[gengulphus] 16/6/2011 15:05

Unfortunately, for 2010/11 you need to run the prog twice (a) for the period 06/05/10 to 2/06/10 and (b) from 23/06/10 to 05/04/11.

I'm fairly certain there are a couple of typos in (a): its period should be from 06/04/10 to 22/06/10, so that the two periods together cover the entirety of the 2010/2011 tax year.

Gengulphus

[daytraders] 16/6/2011 14:24

thx david, well i just used 2(b) for the below calc and it matched my own calcs, i did not need to run twicw it seems, is that because i had no trades between 06/05/10 to 2/06/10 ? can you confirm please, thx


PVR
08/04/10, B, 25000, 3.1334, 798.68
08/04/10, B, 32000, 3.2400, 1054.67
08/04/10, B, 50000, 3.3000, 1674.00
08/04/10, B, 43969, 3.3000, 1472.99
13/04/10, S, 93969, 3.4000, 3187.45
16/04/10, S, 57000, 3.7600, 2135.70

CAD
16/07/10, B, 32602, 16, 5249.90
27/07/10, S, 32602, 17.5150, 5702.74

VOG
16/11/10, B, 89636, 5.5420, 4999.97
16/11/10, S, 89636, 5.8010, 5192.28

GMA
12/01/10, B, 90000, 2.3250, 2110.46
20/01/11, S, 90000, 2.1500, 1927.50

NSN
21/01/11, B, 7683, 64.9750, 4999.53
24/01/11, S, 3842, 75.0000, 2874.00
24/01/11, S, 1000, 77.0000, 762.50
24/01/11, S, 1021, 77.0000, 778.67
24/01/11, S, 1820, 75.0000, 1357.50

ABH
27/01/11, B, 133380, 0.3674, 499.99
28/01/11, S, 133380, 0.3833, 503.75

[david77] 16/6/2011 13:51

I can't remember what the difference is but 2(a) is 0809tax20.htm while 2(b) is 0809tax15.htm so 2(a) is the latest version - I increase the last couple of digits for each mod.

Unfortunately, for 2010/11 you need to run the prog twice (a) for the period 06/04/10 to 22/06/10 and (b) from 23/06/10 to 05/04/11.

You get the gains for each period and add the losses for the whole tax year. I haven't changed the prog because this is a one-off (we hope).

Dates corrected - sorry!!

[daytraders] 16/6/2011 13:10

Ok david cheers, im just useing your cgt calc as i do each year, for the year 10/11 can i use 2(a) or 2(b) for the tax year ? is 2(b) the newer version, as i like that as it includes the exact gain/loss numbers inc pence, cheers as usual for calc.

[david77] 16/6/2011 12:57

If they are AIM shares then their websites will have a 'Rule 26' page which should tell you if the shares are also listed elsewhere, and the HMRC website will give you a list of 'recognised' exchanges.

Alternatively, email the company secretary.

[daytraders] 16/6/2011 12:48

guys i need to know if these are listed or unlisted shares, PVR,CAD,VOG,GMA,NSN,ABH, or is there a website that tells me the info,cheers

[miata] 13/6/2011 15:26

With some ISA providers the responsibility for ensuring ISA-ability is specifically put onto the customer in the terms and conditions:
eg "It is your responsibility to ensure that the investments you choose qualify under Inland Revenue regulations." - from idealing ISA T&C's.

So do read the T&C's.

[gengulphus] 13/6/2011 15:20

I don't think, though, that I could be too heavily criticised for taking my brokers own advice.....even if it eventually turned out to be incorrect.....

Agreed that you couldn't be very heavily criticised for that. But being criticised isn't the only thing that can go wrong - another is having to do a CGT computation without knowing what base cost to use because what has actually happened is something that shouldn't happen, so that there's no rule that properly covers it and you have to resort to guesswork...

Don't forget the fact that selling the shares from the ISA can be accompanied by buying them outside - achieving roughly the same effect as transferring them out but with a much clearer-cut CGT result and with their value kept inside the ISA. It does involve trading costs, but they're not necessarily all that large if the broker will do a 'package deal' for the two trades. I believe such deals are quite common in the opposite direction, to effectively move shares into an ISA (known as 'bed and ISAing'), and it may well be worth asking them if they can do one for you. Indicating that you'll regard it as suitable compensation for their mistake in allowing you to buy the shares in the first place might also help.

It does of course also involve having funds available outside the ISA for the purchase - if you don't, that's harder to fix...

Gengulphus

[gengulphus] 13/6/2011 15:01

The following may be of interest:



Of interest, yes. But I'm rather doubtful about mjbdreamer's advice in it that the mistake was down to Barclays. They could very well argue that (at least if it was an execution-only ISA) it is entirely the customer's responsibility to choose eligible investments to buy in their ISA, and that their systems for preventing the purchase of ineligible investments are merely them attempting to fulfil their obligations to HMRC as an ISA manager. Not advice to the customer, which they're not allowed to give for an execution-only account...

Not saying that argument would succeed - I'm doubtful about whether mjbdreamer's advice is correct, not certain that it is incorrect. I'm just saying that the situation doesn't seem as clear-cut to me as mjbdreamer makes it sound. Be prepared for a fight if you try his approach - especially the "credit the original purchase cost" option - and don't be too certain it's a fight you will win!

Gengulphus

[miata] 13/6/2011 13:55

Re 6110 last paragraph, the above related to the rectification of inadvertent breaches not any option to transfer out shares on which losses have been incurred
- on correction of the breach the ISA manager would have to pay the CGT/income tax saved by the ineligible investments being incorrectly in an ISA
- the logical mirror image being that any relief for losses should also be rectified.
It was stated that the option was to be a transfer with no sale or purchase, that being the case there would be no new contract note and no stamp duty.

The following may be of interest:



Good luck in trying to get them to credit the original purchase cost to your ISA !

[hugepants] 13/6/2011 13:54

thanks gengulphus. However they dont mention tax at all in the circular so I'll maybe just contact them myself.

[cwa1] 13/6/2011 13:49

Many thanks for the replies.

It looks as if Selftrade have no doubts that you can do either:

As a result, under HMRC rules, the holding must either be sold or transferred out of the ISA within the next 30 days

Of course I KNOW that doesn't mean it's correct ;-)

I don't think, though, that I could be too heavily criticised for taking my brokers own advice.....even if it eventually turned out to be incorrect.....

It would be very helpful to me to create some losses out of this and that would indeed be more useful to me than selling it for the current depressed(IMVHO!) price.

I suspect that Gengulphus is correct in his assertion that it would be based on the transfer value even IF it was allowable to transfer it in the first place-but it would certainly be nice to know definitively one way or the other.

Once again, my thanks for your thoughts on this one.

[gengulphus] 13/6/2011 12:59

Having now seen MIATA's answer and the quote it contains (which is also from HMRC's guidance notes), I agree with him that transferring the ineligible investments out does not appear to be a legitimate way of repairing the mistake. There's a separate section that says "sell within 30 days or transfer out" is a legitimate way of dealing with the situation where what was an eligible investment in the ISA has changed into an ineligible one (e.g. because the company has transferred from the main market to AIM and is not listed on any other recognised stock exchange), but that's not the same situation as inadvertently buying something when it wasn't an eligible investment.

I would regard that as an additional reason to choose the "sell" option rather than the "transfer out" one - you might as well get the mistake dealt with correctly and avoid any potential cans of worms in trying to do subsequent CGT calculations about an incorrectly-handled mistake...

I presume that the "seek a recovery" part of MIATA's quote means that the taxman could try to collect normal tax on the income and gains earnt by the ineligible investment. That doesn't look to be a danger for IRG!

I would add that I strongly doubt the "Original cost, if you understand Selftrade correctly." part of MIATA's answer. I'm pretty certain that for a legitimate transfer out, the CGT base cost of the transferred-out shares is the market value on the day they were transferred out. That's for three reasons:

* I think I've actually seen it stated somewhere (though I'm afraid I haven't got the time at the moment to try to track it down).

* I cannot see any other reason why the ISA manager should have to supply that value to the investor on a legitimate transfer out.

* If it were the original cost, I would expect to have seen tax advice along the lines of "If you've got shares in your ISA that have suffered a massive loss (say 90%+) and you can use CGT losses outside your ISA, transfer them out - they're worth far more to you in CGT saved outside the ISA than they are inside the ISA." I haven't seen such advice, which fairly strongly indicates it isn't original cost. (And in addition, if that did work, I would expect legislative action to have occurred long ago to close the loophole!)

Gengulphus

[gengulphus] 13/6/2011 11:54

CWA1,

My question is: at what price would they be considered to be "bought" for CGT purposes if they were simply transferred to my dealing account? The original buying price, or the price at the date of transfer(NB: They are NOT being sold and rebought if I understand Selftrade correctly).

I think it's the price on the day of transfer. You're quite right about it being a transfer, not a sale and repurchase - you can freely transfer shares out of an ISA, it's only transfers in that are not allowed and have to be done by a sale and repurchase instead (apart from some limited exceptions to do with employee share schemes). And I know it's the market price on the day of transfer for a normal transfer out, and indeed HMRC's guidance notes to ISA managers say explicitly that the ISA manager must provide that market price to the investor in that case. They don't actually say the same thing for this sort of "sell within 30 days or transfer out" corrective action - indeed, I don't think they say anything about that sort of corrective action at all - but it seems to be standard practice and in the absence of anything indicating otherwise, I would assume the same rules apply to a corrective transfer out as to a normal transfer out.

But wouldn't it be simpler all around if you just sold them, and put the loss between your original buying price and the price at which you sell them down to experience? It will probably act as quite a forceful reminder to check that shares you buy in your ISA are listed on a recognised stock exchange (*) in the future...

The consolation prize is that at least you get to keep the sales proceeds inside the ISA tax shelter - if you transfer them out, you're effectively withdrawing their value from the shelter and can only get it back in by using your ISA allowance.

(*) That is the actual check that needs to be made, not whether the share is traded on AIM. A share being traded on AIM is an indication that it may well not be listed on any recognised stock exchange (AIM is not a recognised stock exchange) and so not be holdable in an ISA, but it doesn't settle the question: some AIM shares are also listed on recognised stock exchanges abroad and those ones are allowed in ISAs. A quick look at IRG gives no indication that it is such a share, by the way - I'm just making certain you know the right thing to look for in future ISA purchases.

Gengulphus

[miata] 13/6/2011 11:31

6103,

Original cost, if you understand Selftrade correctly. However the correct approach would be for the ISA manager to sell the investment at market price and credit the cash proceeds to your ISA account.

The following corollory applies to the investment manager:

An ineligible investment is purchased, or held, in an ISA
This breach can only be repaired if it is inadvertent. The manager can repair the
breach by selling the ineligible investments. The proceeds can remain within the ISA and used to buy eligible investments. Auditors will seek a recovery for the period the ineligible investments remained in the ISA.