Capital Gearing Share Discussion Threads

[flyfisher] 19/2/2012 16:46

Gengulphus - thank you for your reply.

[nightspot] 19/2/2012 16:15

I am guessing the answers will be yes, but can you please confirm :-

1) if I sold my shares and bought the same number or more in cfds, the 30 day rule applies?

2) for s104 pooling rules, are shares and cfds pooled together?

I'd be grateful for a reply.

[gengulphus] 19/2/2012 12:04

flyfisher,

Yes, in the situation you describe the £10,000 losses are carried forward unscathed from 2007/2008 into 2008/2009, then into 2009/2010, then into 2010/2011. That's because, unlike same-year losses, brought-forward losses only have to be used against gains in excess of the CGT allowance.

It's not exactly the way the taxman presents it and wants it to be presented in tax returns, but you'll generally get the right answer if you think of the gains being reduced in sequence by:

1) Same-year losses
2) CGT allowance
3) Brought-forward losses

with each step only happening to the extent that the gains are still above zero. So if your gains after dealing with same-year losses are below the CGT allowance, they're down to zero by the time the brought-forward losses are being dealt with, and so none of the brought-forward losses get used.

Gengulphus

[gengulphus] 19/2/2012 11:51

Good point, MIATA - the estate's own CGT allowance had slipped my mind, I'm afraid.

Gengulphus

[flyfisher] 19/2/2012 11:38

Regarding the application of carried forward cgt losses , all share based transactions.

if i record,
a net loss in 2007/08 of £10000
a net gain in 2008/09 of £5000
a net gain in 2009/10 of £5000

do i now have carried forward losses of £10000
or have the 5000 p/a gains been first allocated to reducing the prior years net losses giving a carried forward loss of nil.

thanks for any replies

[miata] 19/2/2012 09:23

The above reply fails to draw the distinction between 'the estate' and the beneficiaries and whether the proposed realisation within 'the estate' is the best course.

Gains from the date of death until realisation (which might usually be say six months) are gains of 'the estate' (which has its own CGT annual exempt amount equivalent to half the normal amount).

If there would be gains (from the date of death) in excess of this amount then some shares should be transferred to the beneficiaries in specie. They can then realise these when appropriate to their circumstances (ie perhaps using next years exempt amount). The same consideration applies to shares that have lost value - transfer them in specie and the beneficiary can utilise the loss.

The rate of Capital Gains Tax for trustees for the 2011-12 tax year is 28 per cent.
The annual exempt (tax-free) amount in 2011-12 for most trusts is £5,300.

[pineapple1] 16/2/2012 12:05

Thanks Gengulphus.Very decent of you to give me the benefit of your knowledge.
Regards

[gengulphus] 16/2/2012 10:42

pineapple1,

I am pretty certain that when HMRC talk about the time limits on making a claim, they mean exactly what they say: a time limit on when you perform the actual action of making the claim. I don't know exactly what they will and won't count as that action - my guess is that it is only getting the written claim safely delivered to them. I.e. I don't think that they would even accept a claim you wrote out now for the 2007-2008 tax year if you failed to actually deliver it to them until after April 5th. But that's just a guess - if you want to know the exact requirements for certain, you'll need to contact HMRC or get professional tax advice.

As regards amending returns, technically that's only possible for a year after the submission deadline for the return - e.g. amending a 2010/2011 return will be possible up to 31 January 2013. Any changes beyond then are generally either a result of HMRC enquiring into suspected underpaid tax (which they can go back a long way for, especially if they have reason to suspect deliberate fraud), or the taxpayer claiming back tax overpaid as a result of a mistake they made (and I do mean "claim" - it's subject to the same 4-year limit as other claims, so if it's tax overpaid in the 2006/2007 tax year or before, the taxpayer is out of luck). Neither of those is actually an amendment in taxpayer terminology.

I'm fairly certain that for that purpose, "mistake" means doing something you shouldn't have or not doing something you should have, not just making the less good choice on something you have a choice about. So you could claim for a mistake such as copying the wrong figure into your return or an arithmetic mistake in computing a gain or loss, but not for failing to make a claim, since a claim is generally something you're entitled to make or not make as you see fit... The net result is that I'm fairly certain you can correct a failure to make a claim by making the claim now if you're still within the time limit for making the claim, but if you're not, you cannot claim the failure to make the claim earlier as a mistake.

Gengulphus

[miata] 16/2/2012 09:54

A little? !!!

[pineapple1] 15/2/2012 23:39

Gengulphus....yes apologies for the confusing language.I suspected that possibility.

Its the definition of the word "claim" and how broadly it can be interpreted that i am exploring.
HMRC gives you until 31/1/12 to "claim" losses incurred back as far as 2005-2006.
So i am unable to use 2005-2006 losses on future tax returns after this date eg.Unusable on any tax return from 2012-2013 onwards, unless previously notified.Thats clear.

Whats not so clear to me is can i still make a claim to use these losses to amend a tax return later than 2006 but EARLIER than 31/1/12,to take advantage of these losses, despite the fact i am talking about them after 31/1/12.

That would enable me to obtain a refund on cgt for 2009-2010 utilising the v old losses.
I am hoping that the word "claim" in the HMRC info could actually have a broad definition.
Would it be really stretching the boundaries of imagination for somebody to interpret the word "claim" as having the meaning " to use" if used in the context of the extract below.Its a little ambiguous to me and i,m uncertain of the spirit in which its written hence my communication with your good self..

Extract from HMRC
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 2006-07 you must make the claim by 5 April 2011.

I believe people often have to amend returns from several years ago for what ever reason.

I think you may have answered this in your one but last paragraph but i,m interested if the above interpretation of the word could be considered.
Perhaps i am being a little too creative with the meaning hoping to use to my advantage.Its annoying as the loss was actually made.
I hope thats a little clearer and thanks once again.
Regards

[gengulphus] 15/2/2012 16:36

pineapple1,

Edit:Can i clarify that the important part is when you make the "actual written claim" . HMRC web site doesn,t really mention if you are retrospectiviley claiming a loss which if you had claimed in 2004 ,for an amended 2009 tax return ,would have been allowable .I understand it would be time barred if claimed for future tax returns.
I hope that makes sense.

Sorry, but no, that doesn't make sense to me. Not in a "that's wrong!" way, but in an "I don't understand that!" way... I can't even work out whether you're trying to ask us whether it's when you made the actual written claim that matters, or to tell us that you've discovered that it's when you made the actual written claim that matters!

If you're asking rather than telling us, I'm pretty certain that it's when you made the actual claim that matters, and I think that the actual claim has to be written to count. But I'm not sure about the second part, and so I'm not sure whether you telling HMRC earlier might count as an actual claim...

If you're telling us rather than asking, for example to pass on something you learnt by contacting HMRC, thanks - but please confirm that you are telling us!

Gengulphus

[bluebelle] 15/2/2012 14:26

Many thanks.

[miata] 15/2/2012 14:25

The protection limits are low (£50k), selecting brokers that use strong independent safe custody nominees (eg Pershing Securities) and diversity (no reason not to have several ISAs and several dealing accounts) are your main defences. In addition, core shares can be held in certificated form.

The safe custody nominee company is a non-trading company which does not incur liabilities and should not therefore be exposed to a risk of liquidation.

[pineapple1] 15/2/2012 14:18

I think you would be highlighted as the beneficial owner but will leave Miata to give advice to rely on.....lol

[bluebelle] 15/2/2012 14:15

MIATA (anyone else feel free to comment)

Slightly off topic but, how do you deal with the possibility of supplier default. Like, I suspect, most on this thread I have a SIPP, ISA and Dealing account all of which comfortably exceed the FSA limit for compensation, but how do I mitigate against the possibility of supplier default. My shares in the dealing account are held by the broker as nominee. What happens if he goes bust ? Likewise are self select SIPPs and ISAs protected in any way. Would welcome any comments.

[pineapple1] 15/2/2012 13:45

Thanks Gengulphus.
I did tell them prior to 31st Jan 2011 and that i was unable to access the records
as i was abroad so it may be worth a go.
Thanks for your help in any case.
Regards

Edit:Can i clarify that the important part is when you make the "actual written claim" . HMRC web site doesn,t really mention if you are retrospectiviley claiming a loss which if you had claimed in 2004 ,for an amended 2009 tax return ,would have been allowable .I understand it would be time barred if claimed for future tax returns.
I hope that makes sense.

[brancho] 15/2/2012 12:24

Gengulphus,
Thanks. I did fill in a tax return for 2010/11 and previous years. Will get letter off and comps pronto. Many thanks for your, as ever, comprehensive response.

[gengulphus] 15/2/2012 10:46

Brancho,

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?

Did you get asked to fill in a tax return for 2010/2011?

If you did, you made a mistake in your 2010/2011 tax return, since the instructions for filling in the Capital Gains Summary supplemental pages and supplying accompanying CGT computations say to do so if your disposal proceeds are over 4 times the CGT allowance and yours are well over! However, that mistake is easily fixed: you can amend your 2010/2011 tax return any time up to January 31st, 2013 (as long as the taxman hasn't yet launched an enquiry into it). Amending a tax return might result in having to pay interest and surcharges on underpaid tax, but not in penalties, and in your case there is no underpaid tax. So what you should do is amend your 2010/2011 tax return to include the Capital Gains Summary supplemental pages and accompanying computations.

If you didn't, there's no problem about the proceeds of your sales being well over four times the CGT allowance, because that limit is merely part of the instructions for filling in a tax return. If you're not asked to fill in a tax return, you're only required to inform the taxman if you have Income Tax to pay in excess of what has been deducted at source, or if you have CGT to pay. You're clear on the latter, so as long as you're also clear on the former, there's no problem about having failed to submit a tax return.

However, you do of course want to claim the losses. The way I would do that is to prepare CGT computations for the 2010/2011 tax year just as I would if I had to prepare such computations to accompany a tax return and its Capital Gains Summary pages. In particular, I would do it for both the gains and the losses - needed because you can only carry the excess of the losses over the gains forward into 2011/2012, not all the losses. Then I would write a letter to the taxman, with a copy of the computations enclosed, stating that you are claiming all the losses detailed in the computations, that the excess of the losses over the gains is £X, and that you are carrying that excess forward into the 2011/2012 tax year.

He might respond by asking you to fill in a 2010/2011 tax return, in which case you'll have 3 months to do so. But hopefully giving him full details of the CGT position will make him see that there's no point in asking for anything more.

To forestall a possible question, your 2010/2011 CGT allowance does not come into the CGT computation - it is purely the excess of the losses over the gains that gets carried forward. That's because same-year losses get used against gains before the CGT allowance does - so if you've got an excess of same-year losses over gains, there are no gains left by the time you move on to the CGT allowance, and so the allowance is completely wasted.

Gengulphus

[gengulphus] 15/2/2012 09:28

pineapple1,

In general, sorry, no - the 4-year time limit is on making claims in general. The claim must be made by the end of the 4th tax year following the tax year in which the claimed event happened. If you're claiming a loss that you realised in the 2004/2005 tax year, that time limit is the end of the 2008/2009 tax year (*), so you can no longer make the claim.

There is a sort-of-exception in the case of negligible value claims. They technically have a tighter time limit on making the claim than there is for claims in general - it must be made by the end of the 2nd tax year following the tax year in which the claimed event happened, and furthermore it must be made at a time that the taxpayer still owns the shares, those shares must have negligible value, and they must have changed from having non-negligible value to having negligible value during the period of ownership.

But there is a subtlety: for a negligible value claim, the claimed event is not the date the shares actually became of negligible value. Instead, it is taxpayer-determined, within limits: it occurs at a time of the taxpayer's choice, with those same extra restrictions that the taxpayer must still have owned the shares at the time and that they must have become of negligible value during the period of ownership. (And because the timing is taxpayer-determined, the time limit is usually expressed as a limit on that timing rather than a time limit on making the claim: it must be in the tax year that the claim is made or one of the two preceding tax years.)

So if by any chance the loss you think of as having been realised in 2004/2005 happened because the company collapsed, not because you sold the shares, then you might still be in with a shout. The crucial date in that case would be when the company was finally dissolved and so the shares ceased to exist, which can happen years after the company collapsed. If the company has been dissolved, that date is the date on which you realised the loss and so you might still be within the time limits for claiming the loss; if it hasn't yet been dissolved, you're still within the time limits to make the negligible value claim and claim the loss.

But if you actually realised the loss back in 2004/2005, by selling the shares or otherwise giving up your ownership of them, then I'm afraid you're out of luck.

(*) Or it might well have been the January 31st about 5 years and 10 months after the end of the 2004/2005 tax year, i.e. January 31st, 2011. That's because the time limits changed a while back, with some somewhat messy transitional arrangements. But I haven't bothered looking to see exactly what the deadline was - pointless, since we're past it either way...

Edit: In the above reply, I overlooked the bit about having previously contacted HMRC about the loss and them having made a note of it. If that previous contact was before the deadline for claiming the loss (which I think will have been January 31st, 2011 for a loss realised in 2004/2005 if you didn't have to fill in a tax return for 2004/2005, and some date in early 2010 if you did), you might be in luck - but only if HMRC count that earlier contact as claiming the loss. Cannot give any guidance on whether would do so other than to suggest asking them! (But obviously no point in asking if the earlier contact was after the deadline.)

Gengulphus

[pineapple1] 13/2/2012 12:45

Gengulphus........i have rediscovered a capital gains loss i made on an old share account from tax year 2004-2005.

I did not notify the tax man at the time of this loss as i was unaware of the need to do so.(was not that serious with shares at the time and was rather careless).

Now i know i can,t claim this loss for tax yr 2010-2011 but would i be able to back date it and apply it to tax yr 2009-2010 so it is time allowed and claim back some of the capital gains tax i paid in that tax year.
I was out of the country most of 2011 so i did notify them that i may have some earlier losses to offset but was unable to due to the fact i was out of UK for 6months and did not return till Feb.The lady i spoke to was not that knowledgable but did make a note on the computer record.Its a £10k loss so worth claiming if i can to claim back from last years bill if possible.
Would appreciate your veiws before i try and if its even worth it.
Regards

[spurberry] 11/2/2012 12:05

Thanks David so all the same tax rules as any other exchange. Thought it could not be right.

[david77] 11/2/2012 09:35

Not correct.

[spurberry] 10/2/2012 22:28

Sorry guys,

Very stupid question, I heard that you do not pay cgt on gains made on companies listed on the plus markets, is this correct?

Thanks in advance.