Capital Gearing Share Discussion Threads

[brancho] 10/2/2012 18:47

A quick question (hopefully).

I am registering some losses under the 4 year rule (2008/09 to 2010/11). I did not register them before because there was no tax to pay but one of the years (2010/11)breaks the the limit in terms of value of sells and buys (£129k v £119k)i did that I should probably have declared despite incuring a loss. I realise that I am going to probably need the losses against profits for 2011/12. Am I likely to get fined for late declaration?

[dia43] 10/2/2012 17:11

MATA, Thanks

Gengulphus, Thank you for taking the time to answer in such detail.

My trading costs would be £19.5(JIM)+1% + spread,so i feel happy on that score.
They'll settle in 3 days with cash and their normal sell time is 10 days,allowing for post etc.

[miata] 10/2/2012 08:46

Actual. t whatever irrelevant to 30 day rule (transaction date = contract date).

[dia43] 10/2/2012 07:12

I too have been thinking of ways of reducing my cgt burden,if GKP take off big time?

My first action was to gift to my family some shares(£2 at the time),as i understand it,the gain prior to the gift is down to me and any further gain is against the recipetent of the gift(£2+)?

My 2nd thought is to sell any loss making stock(in the tax year of gain?)and then take out a S/B on that company? (PTR comes to mind as i want to continue to hold).

A further thought (and im open to advice),would to buy the stock (gkp)on a t3 (cash required in advance)and then follow shortly afterwards,with a sell on a t10.
So avoiding the 30 day rule?

Comments would be welcome.

ps The 30 day rule,is that actual or trading days?

[gengulphus] 09/2/2012 11:12

dw887,

The basic rule about submitting tax returns is pretty simple: you have to submit a tax return if the taxman asks you to submit one (*). Whether you need to include anything about capital gains and losses in it is another matter. The rules for whether you do are in the instructions for filling out a tax return - see page TRG 5, under "7. Capital gains summary".

If the taxman doesn't ask you to submit a tax return, then:

* You need to check whether you owe the taxman more Income Tax for the year than has been deducted at source (e.g. by PAYE or the tax deduction banks make from interest paid on your savings). If you do, you have to notify the taxman of the fact by the October 5th six months after the end of the tax year concerned. He'll probably respond by asking you to submit a tax return - but if the details of why you owe extra tax are simple and straightforward, he might use a more streamlined approach, so include details of the extra tax you owe with the notification if they're simple and straightforward.

* Similarly, you need to check whether you owe the taxman any CGT, and notify him in the same way if you do. And there is a slightly tricky aspect to that: CGT is calculated on the capital gains you've realised in the tax year minus capital losses realised in the tax year that you have "claimed" by telling the taxman about them (and possibly minus losses you have brought forward from earlier tax years, but I won't go into that rather messy subject here!). The net result is that if your capital gains go over the CGT allowance for a tax year without taking any account of losses, you will have to contact the taxman one way or another - because you owe him CGT, or you need to claim losses that reduce those gains, or both.

* If you want to, you can submit a tax return anyway. You might want to if (for example) you owe the taxman less Income Tax for the year than has been deducted at source, so that he should be refunding you the difference. (Though again, if the reason you're owed a refund is simple and straightforward, there may be a more streamlined way of claiming the refund than submitting a tax return.)

Applying all that to your situation:

* If you're asked to submit a tax return for the current 2011/12 tax year, submit it. Based on what you've said about your trading, it looks unlikely to me that you'll have to say anything in it about capital gains and losses - but check the instructions for filling it in to make certain. (Note the instructions do occasionally change from one year to the next, so make certain you check the ones for the 2011/12 tax return, which won't be available until April. The above link is the instructions for the 2010/11 tax year, and the ones for the 2011/12 tax year will probably be very similar - but no guarantees!)

* If you're not asked to fill in a tax return for the 2011/12 tax year, then with just a £700 capital gain so far in the tax year, it looks unlikely that you're going to even get near the CGT allowance of £10,600 gains in the rest of the tax year! Assuming you don't, you don't have to tell the taxman anything about your capital gains and losses (but you still need to check your Income Tax situation and tell him about that if necessary).

However, if by some chance you do go over £10,600 gains in the tax year, you will have to contact him about having CGT to pay, losses to claim or both, as described above.

(*) HMRC has a more detailed policy about who they ask to submit tax returns, which they describe in . As far as I am aware, that policy isn't actually tax law - the tax law concerned is just that if you're asked to submit one, you have to. But if anyone meets the criteria on that page and isn't being asked to submit tax returns, they ought to consider letting HMRC know - submitting tax returns is a pain normally, but finding yourself being asked to submit ones for years back because HMRC discover they'd failed to ask you and want to catch up is a worse pain!

Gengulphus

[singh is king] 08/2/2012 19:46

Hi Gengulphus.Thanks for your comprehensive reply.
I have answered yes to the are you making any claims question and i also made a detailed negligible value claim for JRVS on my return.

[dw887] 08/2/2012 17:36

Hi Gengulphus

Thanks for your reply.

The shares I bought earlier in the year were LlOY ordinary shares through my iii trading account. Only been interested in trading for a year or so and am more of an investor than a trader. This was my first sell and wanted to use the funds for another company I was looking at. So after your reponse I can see that I do not have to pay income tax on any profits made. One other point, do I have to submit a rax return even if my profits end lower than the capital gains allowance of £10,600?

Thanks for your help,

dw887

[zingaro] 08/2/2012 14:26

Thank you Hectorp and Gengulphus for that advice.

[gengulphus] 08/2/2012 14:10

Do note though that moving shares into spreadbets, SIPPs, etc, doesn't just exempt subsequent gains on those shares from CGT. It also exempts subsequent losses on them from CGT. So moving shares that have made a big gain from normal ownership to a spreadbet could be bad news if they subsequently lose all of that big gain: you end up paying CGT on the gain without being able to offset the loss against the gain (if realised in the same tax year) or against future gains (if realised in a later tax year).

I realise that you're expecting future gains, and if you turn out to be right, my warning about subsequent losses won't matter. But do consider the possibility that you might turn out to be wrong. You want to make certain that a disaster for the company doesn't become too bad a disaster for your finances.

I should say that the above is not a veiled warning about GKP - I haven't looked at the company and basically don't know anything about it. Other than the general knowledge that disasters can hit any company...

Gengulphus

[gengulphus] 08/2/2012 13:40

dw887,

I pay PAYE, work full time, and made £700 on some shares last month and was wondering if I have to pay income tax on this amount.

Assuming that when you say you "made £700 on some shares last month", you mean you sold the shares for a £700 profit over what you paid for them, no, you don't have to pay Income Tax on them. Such profits are "capital gains", not "income", and are never taxed by Income Tax.

If you make enough such profits in a tax year, minus any similar losses, to exceed your CGT allowance (£10,600 for the current 2011/2012 tax year), you will probably have to pay CGT on the excess. Your Income Tax situation might affect how much CGT is due on the excess - but the tax paid on the excess is definitely CGT and not Income Tax. Which makes some fairly important differences, such as what tax rates apply, and the fact that the Income Tax system tends to assume that you're going to pay roughly the same amount each year as you did the year before and collect that amount through your tax code and/or payments on account, but the CGT system doesn't make any such assumption - basically it knows that capital gains and losses can vary wildly from year to year because of market conditions.

If by any chance you made the £700 on the shares by some method other than selling shares you bought earlier, say how you did it and we should be able to say what the tax treatment is. For example, if you received £700 dividends on some shares you'd bought, dividends do count as "income" and are taxed by Income Tax, not CGT, or if you made the profit on a spreadbet based on the shares rather than by actually buying and selling the shares, betting profits don't count as either "income" or "capital gains" and are not taxed.

Gengulphus

[gengulphus] 08/2/2012 12:19

tehmac,

However, I am being stung by the change in foreign exchange rate from day to day, and it's eating into my profits or making losses worse. I do have the option however to change my entire account balance into USD instead of GBP, which means I could trade at the same level all the time and convert it back later at a time of my choosing. However, it means my transaction history will all be in USD rather than GBP.

Note that if you do that, you will have to work out CGT on your holding of USD as well as on your shareholdings. Specifically, each time you buy shares for USD, it counts as a disposal of USD and an acquisition of the shares, both for the GBP equivalent at the time, and each time you sell shares for USD, it will similarly count as a disposal of the shares and an acquisition of USD.

Gains and losses on the holding of USD can be calculated similarly to gains and losses on a shareholding, but with one important difference: the 30-day rule does not apply to foreign currency holdings. Alternatively, there's a simplified "do a month at a time at the average rate" method.

I won't try to describe it all in detail, but take a good look through for the taxman's take on CGT on foreign currency holdings.

To save people some potential worry, note that there is no need to do CGT on foreign currency when it's holiday money or similar spending money - it's basically only when you hold it as an investment (or part of a portfolio of investments) that CGT computations on it become necessary.

Gengulphus

[hectorp] 08/2/2012 09:53

Zingaro- try to sell less than say, half of your presently profitable GKP. ( I
am in the same boat with you there) and open a spread bet account with for example, IG Index, and buy some late-dated GKP long positions there, maybe June 2012 , the spread is around 4-5p.
You will need to put up approximately 25% cash per 'share' in the spread bet. It is no different in effect to opening a CFD account. However, you will have NO CGT on your future GKP gains if you choose a spread bet account as it is tax free and is technically, gambling. However, the spread bet follows the actual price of the real share.
This is also what I did. I will therefore have very little CGT next year, if GKP goes to our hoped for 800-900p a share or even more, this year. Also I believe there is some scheme for transferring shares INTO the spread bet account, reducing the costs.
People say negative things about IG, for example, they sometimes whipsaw prices. It has never happened to me and I've been with them in GKP now for 9 months.
You will be wise to hold up to 100% margin which is what I do, effectively I am 'puting up' 50% of the value of each position so I cannot easily be stopped out! But, the CGT saving would be huge IF GKP were to double from here, which we agree is possible.
You MAY save yourself a further £20-30,000 tax. This is NOT investment advice etc nor am I inferring any scheme to avoid CGT, this is all generally known here. And good luck with your further study on this matter. PS I still hold some actual shares too, but only around 30% of them.
Hectorp

[miata] 08/2/2012 09:39

My advice would be - don't let the tax wag the dog. I did that when Logica shares hit £20. My average cost was about £2. My tax would have been 40% of the gain. I thought that if I held on for a few more months, I'd get most of the gain within the next years annual exempt amount. The ones I kept are now 83p.

However you could try putting some in a SIPP or spreadbet account. You can contribute £3,600 (£2,880 before 20% tax refund) or 100% of earned income (if higher) to a SIPP annually.

[david77] 08/2/2012 09:26

My advice would be - don't let the tax wag the dog. I did that when Toledo shares hit £5. My average cost was about 128p. My tax would have been 40% of the gain (AIM shares held under a year). I thought that if I held on for a few more months, I'd only have to pay 20%. I never did sell 'cos I always thought that they were worth more than the market price. The shares are now 27.5p.

[zingaro] 08/2/2012 09:13

I have GKP shares with a potential capital gain if I sold of 30,000 pounds. That would be OK on my lowish pension of 10,000pa but I expect them to more than double in the next six months and then have a potential (or even actual gain on a takeover) of 100.000 pounds.

What instrument eg cfd would allow me to sell my shares now and pay CGT on the 30,000 but buy into the future gain in a way that avoids CGT (at least on most of the gain)?

Thx.

[miata] 08/2/2012 09:05

dw887, The first £10,600 of gains per tax year is exempted from tax.

[dw887] 07/2/2012 21:18

Hi

I pay PAYE, work full time, and made £700 on some shares last month and was wondering if I have to pay income tax on this amount.

thanks

[david77] 06/2/2012 12:03

Your opening pool quantity was too high. Was your opening pool cost correct? I suspect not, which means that your opening average cost price was probably wrong so your calculated gain is probably suspect.

[rangers99] 06/2/2012 11:57

kevin you must have missed some trades. Either that or there has been a share restructuring which you have not factored in.

[radhaz] 02/2/2012 18:18

Ah! It seems my problem above is due to an HMRC computer 'issue'...


"A technical fault has left self-assessment taxpayers unable to check their payment status - on deadline day, Sky News has learned.

The glitch comes as Her Majesty's Revenue and Customs (HMRC) is inundated with thousands of online returns on the last day that self-assessment forms are normally accepted.

The error means that although a taxpayer may have transferred money from their bank account, the payment is not being reflected on the HMRC website.

As a result, account information for some taxpayers shows that they may still owe thousands of pounds for the tax year 2010-11.

"There are no problems with submitting your tax return online or paying any tax owed," a HMRC spokesman told Sky News Online.

"Due to high demand today, unfortunately some customers might face a slight delay to their 'view account' page updating.

"But this should rectify itself once demand subsides, and does not impact anybody's ability to file."...

[miata] 02/2/2012 10:44

187
Yes, if you use monthly exchange rates you will have a monthly profit or loss on exchange when you re-value from the previous month's exchange rate. Consider a 12 column Excel spreadsheet

1 2 3 4 5 6 7 8 9 10 11 12
DOLLARS STERLING
Cash In Purchases Sales Divs Cash Out Balance Cash In Purchases Sales Divs P&LonEx Cash Out Balance
Funding 1530 1530 1000 1000
P&L on Ex 1530 -62 938