Capital Gearing Share Discussion Threads

[old portmuthian] 29/7/2011 16:00

Thanks for that.

[miata] 29/7/2011 15:58

Yes.
Yes - but if large amounts this might just be considered an artificial tax avoidance scheme.
If amounts are larger than the annual IHT exemptions then the transfer would be a Potentially Exempt Transfer for IHT and might be caught for IHT if you die with a large estate within seven years. In the event of death within seven years of making a gift, the value added back to your estate is the historic gift value, not the value as at date of death.

[old portmuthian] 29/7/2011 15:11

I usually sell some shares to my partner (not married but living together) to square of gains/losses for CGT.

My broker suggested I gift the shares as it involves no cost (which I have now done).

Can you gents confirm that gifting has exactly the same result as selling i.e. I show it as a sale at mid for my CGT and she as a purchase at mid for her CGT when she sells them.

Can she gift them back to me at a later date and are there any hidden restrictions attached to gifting that I should know about.

TIA

[shano2] 28/7/2011 15:17

Many thanks Gengulphus, you have been a great help and it is reassuring to have your opinion.

[gengulphus] 28/7/2011 14:40

shano2,

So, my understanding is that I take this cash value of the specie dividend and treat it as a dividend and use the cash value as the purchase price for CGT purposes.
If Gengulpus or Miata would confirm it would be greatly appreciated.

I think I've already made it clear that I wasn't certain about the correct treatment, and actually thought it would be a different one - so I cannot confirm that it's the right treatment. But the reply you quote from the company does indicate that it's to be treated as a cash dividend, and yes, if that's the case then the cash value is the purchase price of the shares.

And in any event, you've made a reasonable attempt to establish the situation and have good reason based on the company's reply to treat it as a cash dividend in your tax return and to be able truthfully to declare that the return is complete and correct to the best of your knowledge and belief, so even if it is wrong, it would be hard to penalise you. Nor can it result in you underpaying tax, as the 'cash dividend' treatment could result in you paying tax now (it depends whether you're a basic-rate taxpayer or something higher) and the 'share reorganisation' treatment would not, so there cannot be any question of interest or surcharges on underpaid tax. So you've got reasonable grounds to think the 'cash dividend' treatment is correct and you're pretty safe even if it isn't...

Gengulphus

[nomunnofun] 28/7/2011 14:19

It does in this bit SoundBuy - £52000 total costs.


This means your gain before applying any reliefs is £148,000 (£200,000 - £50,000 - £2,000).

[soundbuy] 28/7/2011 14:12

Thanks for your reply

Just that in step 4 doesn't indicate if £2000 cost was up and above the £50,000, ie £52,000 spent or part of the £50,000, ie £48,000 spent on shares plus £2000 costs.

[nomunnofun] 28/7/2011 14:01

X- £1382.85

Y - £488.90

Z - £968.15 loss

is my take.

Is step 3 below the issue?

[soundbuy] 28/7/2011 13:27

Feeling I've been working out CGT wrongly. What would these examples work out at? Any help appreciated.

eg.Company X

Share Purchase Total Cost £2299.99

Comprising

Shares £2278.65
Fees £9.95
Stamp Duty £11.39

Shares sold Total £3692.79

Comprising

Shares £3682.84
Fees £9.95

---------------------------------------------------
Company Y

Share Purchase Total Cost £64,069.65

Comprising

Shares £63,740.00
Fees £9.95
Stamp Duty £318.70
Levy £1.00

Shares sold Total £64,569.50

Shares £64,558.55
Fees £9.95
-----------------------------------------------------
Company Z

Share Purchase Total Cost £1999.45

Comprising

Shares £1979.60
Fees £9.95
Stamp Duty £9.90


Shares sold Total £1041.25

Comprising

Shares £1031.30
Fees £9.95



TIA for any assistance.

[shano2] 28/7/2011 11:32

Re the above - I contacted the company and my e-mail was passed to the Company Secretary.

I submitted your query and this is the reply:



Its a dividend with a cash value at the Admission Date equalivant to the mid market price at the end of that day.





Thanks

Hayley

So, my understanding is that I take this cash value of the specie dividend and treat it as a dividend and use the cash value as the purchase price for CGT purposes.
If Gengulpus or Miata would confirm it would be greatly appreciated.

[shano2] 27/7/2011 08:53

Gengulpus and Miata - many thanks for your replies.

I may add that although I hold less than 300000 WTI shares I will still receive shares in the new company as my WTI shares are held in a nominee account. I have not been given the option of cash.

I do hope you do not mind that I have posted your replies onto the WTI thread as I am sure there are others in the same boat as myself.

[gengulphus] 27/7/2011 08:29

That's not an option to receive cash - it doesn't present any shareholder with the choice between receiving cash or receiving shares. And the "Stock dividends" section of the HMRC helpsheet I linked to starts off with "In a stock dividend, the company paying a dividend gives its shareholders the option of taking the dividend in the form of new shares rather than cash."

Not saying though that it definitely doesn't apply - this is an area I don't know much about, and nothing I've found yet seems to be entirely clear about it. But at least on the face of it, the Weatherly dividend in specie fails to meet HMRC's characterisation of a "stock dividend" at the first hurdle.

Gengulphus

[miata] 26/7/2011 22:59

Surprise

'that generally requires the shareholders to have been given the option of receiving the dividend as cash'


"Shareholders on the Weatherly share register who hold less than 300,000 ordinary shares in Weatherly, and any Weatherly shareholders who have registered addresses in the United States of America or Canada shall receive a cash dividend based on the cash equivalent value of the Dividend in Specie"

[gengulphus] 26/7/2011 22:21

shano2,

WTI are spinning off part of their business which is to be floated as a new Company with existing shareholders receiving a specie dividend of X shares in the new Company at the float price of 40p.
Is this treated as receiving X multiplied by 40p and declared as dividend income?

My suspicion is that no, it's treated as a share reorganisation as described in - the closest analogue in it would seem to be the section entitled "Demergers" on page 7 and its reference to using the apportionment method described on page 5. I'd be a bit surprised if the company could change that treatment into treating it as a cash dividend just by calling it a dividend in specie rather than a demerger - that generally requires the shareholders to have been given the option of receiving the dividend as cash (see the section entitled "Stock dividends" on page 6).

But I don't actually know, and it's certainly been known for tax treatments to surprise me, so it might be worth contacting the company's investor relations people and asking whether they can tell you what they expect the general UK tax treatment to be. Be clear that you're only asking about the general tax treatment, not about how it specifically applies to your situation - they aren't allowed to give individual tax advice, so if you don't make it clear that's not what you're after, you're likely to get a "We cannot give you tax advice - consult your tax adviser" response. You may get that anyway if they decide to play it safe, but you might as well improve your chances as much as possible!

Another option is to ask your tax office. Again, make it clear that you're asking about the general tax treatment of dividends in specie, and not for individual tax advice.

Gengulphus

[celeritas] 26/7/2011 21:36

Ah right, that's good I'll double check, thanks again.
I was going to say that, how do I do an automatic format to suit yours?

Edit, noticed you have something that can do it.
I notice it says you save your files to floppy disks, lol.

Does yours break down tax owed in each tax year?

[david77] 26/7/2011 21:30

My CGT calculator is from link 2(a) on www.stonebanks.co.uk

Both provide very similar results but in different formats. There are routines for converting the input data to the format for the other program so that you can check that the results seem correct.

[celeritas] 26/7/2011 21:16

David, I only see the pool quantities, no sign of the pool price.
Is this the right one

[david77] 26/7/2011 21:09

The lowest box on the results page on my prog is just the pool quantities (current holdings) and pool price and that's all I carry forward to the next year. I should keep a note of buys within the previous 30 days - I don't - and after 30 days everything is ok.

[celeritas] 26/7/2011 20:49

Thanks David, I use your program every year then give my trades to my accountant which always marry up to within a few pounds, last year was bang on. Maybe it's time I just handled it myself.

Do you keep the buy and sells from previous years in your new file for a certain stock if you still hold the same stock but have yet to sell all of them?
So say I had 50,000 of a stock and sold 10,000 in one tax year, would I have to carry forward the 50k buy plus the 10k sell to keep it right. I could make my new file smaller if I could lose previous years trades.

[shano2] 26/7/2011 19:06

WTI are spinning off part of their business which is to be floated as a new Company with existing shareholders receiving a specie dividend of X shares in the new Company at the float price of 40p.
Is this treated as receiving X multiplied by 40p and declared as dividend income?
Many thanks

[miata] 26/7/2011 18:12

It is unlikely that HMRC would go back more than six years unless they discovered fraud. Real grief would only be likely to occur if you had made errors which meant you had underpaid tax - when there would be penalties and interest.

[handykart] 26/7/2011 18:01

Taxmuddle,I would contact HMRC as soon as possible, and explain the situation.
I was late filling in my self assesment form this year,and got an automatic £100 late payment penalty.If it was another 6 months late, then another £100 to pay.Further penalties can then be added up to £60 a day(according to the note they sent me).They also charge interest.
If you phone, it seems to take ages to get through.They then may say you need to talk to a technician.Then another long wait.

Good luck, hope you do not have to wait to long on the phone !

Andrew

[taxmuddle] 26/7/2011 17:34

I'm very grateful for the replies on my CGT situation.

Would it be best to write(or call) them and explain the situation? Or would it be sufficient to send them a(large!) bundle of paperwork with my next tax return?

If I may, I also have a couple of supplementaries.

If I had not spoken to my friend and had been blissfuly unaware of the CGT situation and had not spoken to you on here and I had carried on as I were....if I had a tax audit in say 2, 5 or 10 years time, would I still have been allowed to supply the extra information at that point without it causing too much grief/penalties/etc?

Is there a time limit for how far back the tax people can, or would, realistically go for something like this?

Many thanks, once again, for your help.

[david77] 26/7/2011 17:14

I update my CGT list whenever I buy or sell a share. I don't put the contract note away until I have updated the list. Matching trades went out a couple of years ago - buys get added to a 'pool' (a section 104 holding) which is total shares held with total price paid - that is carried over from year to year.

At the end of a tax year (5 April) I run my prog and create a new file for the following tax year using info provided in the bottom text box. If you are really keen to keep to the rules, you should also check sales in the new tax year to see if they were within 30 days of an earlier buy. I don't bother. I close my data list after markets close on 5 April and add all new deals to data list for the next year. It means that a sale within 30 days of a buy would be matched to the pool price instead of the latest buy price. I doubt if the taxman would find the mismatch as the deals are in different tax years, and I doubt if it makes much difference to gain or tax due.