Capital Gearing Share Discussion Threads

[meic] 22/1/2012 10:41

I made a modest profit on share dealing this year below the £10600 allowance. Do I still have to fill in a tax return by January 31?

Or do you only fill one in when you exceed the £10600?

regards and tia

[4screws] 21/1/2012 20:18

can anyone advise a company that can look at all my share trades and also help me register loses.

[nightspot] 21/1/2012 19:16

Thanks for making that clear, David.

[david77] 21/1/2012 18:57

No - you can't claim that as an expense - only direct costs that can be identifed with each deal.

[nightspot] 21/1/2012 18:04

Hi, I have an account with Selftrade and they charge a Management Fee of £42 pa. I know it's only a trivial amount, but do you know if this charge can be taken into account when calculating profits/losses?
Thanks

[maxwellman] 21/1/2012 16:56

how do i make a claim - is there a link to this on the HMRC website - or do i add it to the CGT calculation or add to notes?

[miata] 21/1/2012 14:10

neglible ? I sometimes type that.

You will have to make a claim (as its not on the list).

[maxwellman] 21/1/2012 13:23

Does anyone know if CYC holdings can be deemed of neglible value ?

[gengulphus] 20/1/2012 17:06

If it's the usual sort of paper offer (*), you're basically treated as having bought your shares in the new company for the same amount as you spent on the old shares. That basically passes the unrealised gain on the old shares over to the new shares, still unrealised, and so defers dealing with CGT on it until you eventually sell the new shares.

For straightforward cases, the way to deal with it in the CGT calculators is to take the data for the old holding and edit it to give the new symbol and number of shares, and the same total costs spent on the shares. Those are the important figures to get right; the others are less important. E.g. if using separate price-per-share and trading costs figures, adjust them to make the total (= number of shares * price per share + trading costs) correct - not the other way around!

Make certain you include a description of what you've done somewhere - e.g. write something like "This holding was originally one of N shares in company X, with the base cost being £P, details as follows ... The input I have provided to the calculator does not give actual trade details, but instead reflects the fact that it was taken over for M shares in company Y, so that that holding also has a base cost of £P."

I should add that there are non-straightforward situations I simply don't know how to deal with - typically involving various combinations of corporate actions that re-organise the shares, the 30-day rule, and/or the "no-gain-no-loss" rule for transfers between spouses or civil partners. All I can suggest about such situations is (a) avoid them if at all possible! (b) if you have nevertheless got yourself into such a situation, contact the taxman about how it should be dealt with; (c) don't be surprised if it turns out to be easier to just do those particular situations by hand than to figure out how to fool the calculators into handling them correctly. The calculators have basically done their job if they relieve you of the tedium of doing large numbers of straightforward computations - doing absolutely everything would be nice, of course, but it isn't essential!

(*) It's your job to find out whether it is the usual sort of paper offer! Typically, you should be able to find copies of the formal takeover document on the website of the company being taken over, the company taking it over, or both, and there will usually be a section describing the normal taxation treatment in it. That section will generally have lots of warnings that it's not describing all taxation cases, that anyone in doubt about their tax should consult their own advisers, etc - but it's generally pretty complete as far as typical private investors are concerned.

Gengulphus

[brancho] 20/1/2012 16:17

Thanks G post 152

[prolapse] 20/1/2012 16:10

Gengulphus, thank you very much for your help in post 144!

[gengulphus] 20/1/2012 15:03

My brother has been trading for a while and has never exceeded his CGT limit in any tax year having both profits and losses. I told him he needs to register his trades in order to claim the losses at least due to the 4 year time limit. ...

Basically, there's no point in telling HMRC about your gains and losses if all three of the following are true - where "your gains" means the total of all your realised capital gains without deducting any losses, and "your losses" similarly means the total of all your realised capital losses without deducting any gains:

* Your gains are less than or equal to the CGT allowance.

* Your losses are less than or equal to your gains.

* Either you don't have a tax return to fill in, or you do and none of the other reasons for completing the capital gains supplementary pages applies.

If the third of those isn't the case - i.e. you're sent a tax return to complete and one of the other reasons for completing the capital gains supplementary pages applies (most commonly, having total disposal proceeds over 4 times the CT allowance), then it's necessary to tell HMRC about your gains and losses as part of being able to truthfully sign the tax return declaration that it is "complete and correct to the best of my knowledge and belief".

If the first isn't the case - i.e. your gains are over your CGT allowance - then again you're obliged to complete the capital gains supplementary pages and won't be able to truthfully sign the declaration without detailing your gains and losses. In addition, if your losses aren't enough to reduce your gains to below the CGT allowance, you owe CGT.

If the first and third are both the case but the second isn't, i.e. your losses are greater than your gains, you can truthfully sign the declaration without detailing your gains and losses. But there is still some point in doing so, because the excess of your losses over your gains can be carried forward into future years in order to potentially save CGT in the future.

Overall, I'd guess that probably means that you're right that your brother should be detailing his gains and losses - but if by any chance all three of those criteria apply to him, there's no point in him doing so.

... Is anyone aware of what techniques/methods the HMRC have in finding out if you have potential gains other than through a random enquiry? Some years ago I was aware of a method by which HMRC would request all the trades from some stockbrokers that their clients had executed during a random month and go through to see if any of them had registered potential CGT returns.

No, I've no real knowledge of that. But given how much computer memory and disk capacities have increased, and how much computer speeds have increased and prices come down, I wouldn't be at all surprised if they now routinely get all trade data from stockbrokers, not just randomly sample them, and run routine computer checks on them. There's only likely to be any sort of significant cost hurdle for them when they actually have to get a member of their staff involved in investigating a case...

Basically, I would work on the assumption that they know everything about my UK financial affairs and (given the amount of international co-operation between tax authorities) those in most of the rest of the world as well, and whether they investigate in detail is merely a matter of whether I happen to come to their attention.

Gengulphus

[gengulphus] 20/1/2012 14:32

MIATA,

Your personal allowances will reduce the amount of your income which is taxable and possibly the tax rate that applies.

Thanks - good point. Must admit that that indirect effect was so much part of my background knowledge about CGT that I couldn't think of it! :-(

There's a somewhat tricky aspect to it that (as you say) the personal allowance can reduce the amount of your Income Tax basic-rate band that is unused and so indirectly affect the CGT payable, but cannot be used directly against CGT. So if your income is below your personal allowance and so you have unused personal allowance, you only get the lower CGT rate for your fully-unused basic-rate band, not for the unused personal allowance as well.

Gengulphus

[brancho] 20/1/2012 13:55

My brother has been trading for a while and has never exceeded his CGT limit in any tax year having both profits and losses. I told him he needs to register his trades in order to claim the losses at least due to the 4 year time limit. Is anyone aware of what techniques/methods the HMRC have in finding out if you have potential gains other than through a random enquiry? Some years ago I was aware of a method by which HMRC would request all the trades from some stockbrokers that their clients had executed during a random month and go through to see if any of them had registered potential CGT returns. ta

[abudeener] 20/1/2012 12:21

Hi

Can anyone advise me how I should calculate/represent the recent aquisition of EO bu premier oil, I opted for paper which I understand does not carry any CGT implications, but I need to reflect my profit in EO that is carried forward into Premier. I am unsure as to how to show this. It would of course be preferable if this could somehow be handled in CGTCALCULATOR, which I have found to be an excellent tool.

Regards

Abu

[miata] 20/1/2012 11:39

How to claim a loss
If you normally complete a Self Assessment tax return, there are places to show losses on the Capital Gains Tax summary pages.
If you don't normally complete a Self Assessment tax return, you should claim the loss by writing to HMRC.
You must keep any records showing how you worked out your loss and include your calculations with your tax return or correspondence.

[stocktrade] 20/1/2012 11:06

Thanks MIATA - how do you claim the losses.
I am doing my tax return on line so I have just put the amount in losses
brought forward and used this year box, and uploaded my brokers financial statement showing the loss toegther with the cfd trades supporting the loss. Is this ok or do I have to write to the tax man instead to claim the loss?

[miata] 20/1/2012 10:57

Yes.

Tax year... ended on....You must claim loss by:
2007-08... 5 April 2008 5 April 2012

[stocktrade] 20/1/2012 10:41

I have a capital gains tax bill this year of £10k. I had OTC derivatives (CFD's) losses in 07/08 and 08/09 of £8k. Can I enter these on my tax return as losses from previous years to reduce my CGT tax this year?

[miata] 20/1/2012 08:30

143,

"From 23 June 2010 the following Capital Gains Tax rates apply:
18 per cent and 28 per cent for individuals (the tax rate you use depends on the total amount of your taxable income and gains)"

For gains on or after 23 June 2010, individuals need to work out their total taxable income before working out which Capital Gains Tax rate to use.
First work out your taxable income by deducting any tax-free allowances and reliefs that you are entitled to.
Next see how much of your basic rate band is already being used against your taxable income. The basic rate band for 2010-11 is £37,400.
Allocate any remaining basic rate band first against gains that qualify for Entrepreneurs' Relief - these are charged at 10 per cent.
Next allocate any remaining basic rate band against your other gains, these are charged at 18 per cent.
Any remaining gains above the basic rate band are charged at 28 per cent.

Your personal allowances will reduce the amount of your income which is taxable and possibly the tax rate that applies.

[gengulphus] 20/1/2012 07:43

rivaldo,

Please could someone clarify - in terms of the matching rules for buying and selling within 30 days, does "days" mean calendar days or working days? I assume it means calendar days? So for example, the last day for matching a 1st Jan transaction would be 30th Jan?

Calendar days - but the 30-day rule applies to the next 30 days after the trade date. So if you sell on January 1st, it applies to purchases in the next 30 days, which are January 2nd to 31st, and it's not until February 1st that you can buy without running into the 30-day rule. I.e. one day later than you said.

If a buy on January 1st is involved, by the way, the matching to the January 1st sale is done by the same-day rules, not the 30-day rule. The same-day rules usually end up producing the same result as the 30-day rule would have done if it applied - but not always!

Gengulphus

[gengulphus] 20/1/2012 07:03

ukinvestor220,

one other thing re CFDs. i have understood that CFDs are a different vehicle to plain stock holdings and as such would use separate section 104 holdings and CGT calcs, the totals of which I add together for the final P/L balance. even to the extent that you could effectively 'bed and CFD' a holding to establish a gain / loss (like 'bed and ISA'), or 'bed and stock holding' out of a CFD position.
Any non agreement with that statement ..

I agree with most of that, but am uncertain about the bit about "separate section 104 holdings". I don't know enough about CFDs to be anything more than just uncertain about it, but I've seen statements in the past that the share matching rules don't apply to CFDs and you instead have to identify the specific CFD that was closed. The rationale given was that the share matching rules (including their concept of section 104 pools) are a response to the fact that shares don't generally have 'serial numbers', making it impossible (in some situations at least) to determine as a matter of fact which of a number of shares bought at different prices are the ones being sold. The share matching rules resolve that by saying "here's how to work out which shares you are treated as having sold - and to avoid potentially complex arguments, you're to use these rules even if you can establish as a matter of fact which shares you sold.

The rationale then basically said that CFDs are separately-identifiable contracts and so it was always the case that you could identify exactly which of your acquired CFDs you were disposing of, and so using the share matching rules wasn't appropriate for them.

I should emphasise that the statements I've seen are in posts on boards such as this one, not in more official sources, and that I don't know enough about the subject to be able to say whether they're true. I.e. I'm merely passing on what I've read elsewhere for what (if anything) it's worth.

Edit: One afterthought that I do know from official sources is that even when the "no serial numbers" criterion applies to a type of asset, whether to use the share matching rules can be a tricky question. The specific case I have in mind is when the asset is foreign currency: if it is actual currency, the share identification rules should be used ( ), but when it is a foreign currency balance in a bank account, they should not ( , with rationale in )...

Gengulphus

[gengulphus] 20/1/2012 06:36

Prolapse,

Yes, the way to do it is to make the negligible value claim (use clear language along the lines of "I claim that my holding of N shares in XXX plc had become of negligible value by dd/mm/yyyy") and do the computations on the basis that you sold the shares for nothing on that date. I would also point out the existence of the negligible value claims in the 'Additional info' box on the Capital Gains Summary pages or its online equivalent, to make certain they cannot be regarded as having been concealed.

Though do be careful about relying on your opinion that the companies concerned are 'worthless delisted companies'. I don't fully understand the taxman's criteria for deciding whether the value is "negligible", but the usual situation in which I would make a negligible value claim is a company in administration with the administrators having said that there is no realistic prospect of a return to shareholders. That will involve the company being delisted (assuming it was listed in the first place!) but there are plenty of delisted companies that aren't in anything like that position... Obviously, if the delisted company is paying dividends (as one I own shares in is) or looks likely to do so in the future, it doesn't have negligible value. The tricky question is just how unlikely paying dividends (or other shareholder distributions) in the future has to be before the taxman will accept a company has negligible value. The impression I get is that he has quite a high standard on that - but I'm afraid I don't know just how high a standard...

The risk is that the taxman rejects your negligible value claim and so more tax is due than you've paid - but by the time that you learn of that, it's past the deadline for paying the tax and so interest and surcharges are payable as well.

For future reference, if you want to use a negligible value claim in a tax return and it's not a really clear-cut case such as being in administration with the administrators having said that there was no realistic prospect of any return to shareholders, I would make the claim as early as possible - probably as a stand-alone one made in separate letter so that it doesn't have to wait for the rest of the tax return to be ready.

Gengulphus

[gengulphus] 20/1/2012 05:58

MIATA,

Complex answer, your personal allowances will reduce the amount of CGT levied at higher rates if your taxable gains are very large.

How will your personal allowances manage to do that, please?

Gengulphus

[gengulphus] 20/1/2012 05:54

qipincha,

Just to add to MIATA's excellent answer, I think the phrase "Income Tax loss" is about things that are losses from an Income Tax point of view, not money you lose through being taxed on your income. For example, it would include such things as being self-employed and trying (with a realistic prospect of success) to make a profit, but actually making a loss in a particular year.

If you're not trying to make a profit, the taxman will regard your losses basically as money you're spending on a hobby, not self-employment producing an Income Tax loss. The same applies if you claim to be trying to make a profit from your 'self-employment' but are clearly taking the mickey, with no realistic chance of actually doing so. But e.g. a year or two of losses while you build your business up to a profitable level would count.

Gengulphus