Capital Gearing Share Discussion Threads

[gengulphus] 22/2/2012 20:07

sludgesurfer,

-Is it necessary to inform HMRC before 5th April or I will 'lose' the ability to offset these losses against future gains, or can I inform them of historic losses after the tax year in which they occurred?

You can "claim" losses up to the end of the 4th tax year after the tax year in which they were realised. So no, there's no immediate urgency about letting the taxman know about them.

If you have to fill in a tax return for the year concerned, don't declare them in that tax return, and yet "claim" them later, you might have a bit of explaining to do. It's not difficult to explain, though, provided you didn't meet any of the criteria for having to detail your capital gains and losses - basically, you just didn't realise that you wanted to "claim" the losses.

However, as you don't have to fill in a tax return, that probably doesn't apply to you. I'm more than a bit surprised - I would expect just about anyone with an income of £100k+ to have to fill one in - but basically, whether you're required to fill in a tax return is a matter between you and the taxman.

Having said all that, I don't believe there's much point in delaying "claiming" the losses. It doesn't make the slightest difference to when or how the losses are used; all it does is increase the amount of backtracking that might be required through your tax affairs, and the risk of forgetting to "claim" them until it's too late... So personally, I would wait only until it becomes completely clear what your 2011/2012 losses are (probably May 6th to take account of the 30-day rule) and get the claim in.

Gengulphus

[karateboy] 22/2/2012 16:39

I have run CGTcalculator for the first financial year. How can I use this output as input to my calculations for the second year. I can always repeat the first year calculations when I am doing the second year?

[sludgesurfer] 22/2/2012 11:08

"The question is whether you are getting the tax relief on your SIPP at the right rate fast enough and whether your PAYE deductions accurately reflect the tax you should be paying."

Any pension contributions be they monthly or bonus sacrifice are paid by my employer into my SIPP before any tax is taken off so there is nothing to reclaim that I can see.

Thanks for the explanation, I realised that income above £100k was very tax inefficient but hadn't realise quite how much.

Thanks again.

Sludge

[miata] 22/2/2012 08:25

You can inform them of historic losses after the tax year in which they occurred.
(by 5 April 2015 for 2010-11 losses for non Self Assessment).

Provided you don't have
- untaxed income from property or investments
- expenses to claim (you need a tax return if they're above £2,500)
- Capital Gains Tax to pay
you don't need to register for Self Assessment.

The question is whether you are getting the tax relief on your SIPP at the right rate fast enough and whether your PAYE deductions accurately reflect the tax you should be paying.



If your gross income less all pension contributions is over £100,000 you would benefit by contributing more to your pension.

Under changes that took effect last year, the personal allowance is progressively withdrawn once your earnings exceed £100,000. You lose £1 of the allowance for each £2 you earn above £100,000, meaning that the whole personal allowance is wiped out when earnings reach £114,950. Between these two amounts, the effective (or "marginal") rate of tax is 60pc.

By making pension contributions to bring your taxable income down to £100,000 you get your whole personal allowance back. This wipes out the 60pc tax band and allows you to get the £11,000 pension at a cost of £2,250.

Thus for someone with an income of £114,950 after some pension contributions making a further pension contribution of £14,950 takes your taxable pay down to £100,000, so you regain your full personal allowance. As a result, you pay no tax on the first £7,475 of your earnings, giving you an extra £2,990.

If you are 55 or over you can take 25pc of the pension straight away as tax-free cash, boosting the overall tax efficiency of your pension pot even further. Taking out £3,737 tax-free takes the size of your pension pot to £11,213.

From your initial gross outlay of £14,950, you can deduct £2,990 (from the personal allowance), £5,980 (tax relief) and £3,737 (back in your pocket as tax-free cash). As a result, the net cost of your £11,213 pension pot is just £2,243 – 80pc less.

[sludgesurfer] 21/2/2012 23:14

Evening,

Some general advice if you would be so kind:

This tax year I will earn around £135,000. I have sacrificed about £27,000 of this into a SIPP on top of 'normal' monthly contributions.
In this tax year I will not sell assets which will leave me liable to CGT. However, I have taken some losses during this tax year which I would like to offset against gains in future years when I do decide to sell those shares.

The 'problem' is that I am PAYE and do not fill out a self-assessment.
After trawling the HMRC website it seems that I should inform them of losses for this year by letter.

2 questions:

-Is it necessary to inform HMRC before 5th April or I will 'lose' the ability to offset these losses against future gains, or can I inform them of historic losses after the tax year in which they occurred?
-Should I register for self-assessment? HMRC recommend it for incomes above £100,000 but I'm not exactly relishing the prospect. I'd always assume they'd tell me. It seems somewhat masochistic to request self-assessment?

TIA

Sludge

[kevinobo] 21/2/2012 20:56

Edit: Problem sorted, my mistake.

[gengulphus] 21/2/2012 09:20

karateboy,

A minor point that I've encountered in the past is that Irish shares sometimes have 1% stamp duty or no stamp duty instead of 0.5% stamp duty. I'm afraid I don't know the rules for determining what rate applies to them!

Conceivably some other foreign shares might have similar exceptions.

Gengulphus

[miata] 21/2/2012 08:41

218,
1) Yes on each buy of UK-traded shares (derivatives, eg CFDs and ETFs are excluded as the underlying pays the duty).
2) 0.5%.
3) No.

[david77] 21/2/2012 07:59

CGTcalculator.com has a number of input options. You may find something there.

[karateboy] 20/2/2012 21:23

I have few questions on stamp duties please:
Is there a stamp duty for each Buy? and how much is it? I heard 0.5% of 'consideration' mentioned. Some of my buys have stamp duty and some haven't. If you close your position within the contract time, do you get your stamp duty back ?.

On more related to CGT. People who are with TDW ( Now Directinvesting) , is there away that one can convert TDW statements which we get every 3 months to a format that can be used by the CGT calculators?

[nightspot] 20/2/2012 19:11

Thanks Gengulphus and Miata,

I called my accountant (partner in a medium size firm) and he confirmed your opinion, Gengulphus, that each cfd is an individual contract and s104 pooling and the 30 day rule do not apply. Therefore the gains/losses for tax purposes are exactly as per the schedule the supplier will provide at the end of the tax year showing gains and losses after deducting commissions and daily interest charges applied to each individual contract that has been closed.

Kind regards and grateful thanks,

edit - I shall ask ig to send me a schedule made up to the present to monitor my position as we move towards the tax y/e.

[miata] 20/2/2012 18:24

HMRC hotline [phone]

[gengulphus] 20/2/2012 17:01

nightspot,

As well as MIATA's suggestion, you could of course try phoning HMRC!

Gengulphus

[nightspot] 19/2/2012 21:23

Miata, Thanks - I shall do just that and report my findings back here.

[david77] 19/2/2012 21:11

The initial array is declared as 50 but I know that it works with more than that - I don't know how many more you could get away with.

[karateboy] 19/2/2012 20:21

Thanks Dave. I mis-read the 50 lines limit per share as quoted in your programme as the total limit for the programme.

[miata] 19/2/2012 19:33

I think you should review the details of the appropriate treatment with your accountant.

[nightspot] 19/2/2012 18:59

Gengulphus,thank you very much for your reply.That is a massive relief from the point of working out the cgt.

I appreciate that you're not committing 100% to your view on how HMRC calculate profits on cfds as you haven't found any relevant guidance from HMRC and you don't use them yourself. That does beg the question - If you haven't been able to find guidance, who can??
This is my first year using cfds, and so am feeling my way.

My accountant informed me that their office had a program that worked everything out, but I am wondering now. I also need to know my position now in order to plan sales before the end of the tax year.

The points you make about cfds would seem to indicate that the stonebank and cgt calculators are not to be used for cfds as they would produce the wrong result (vis-a-vis 30 day rule and s104 pooling). This can make a hugh difference to planning which contracts to sell before 5th April as the numbers would be so completely different especially when there has been a substantial movement in the share price. I wonder if anyone who has had experience of how HMRC deals with cfd gains calculations could comment.

Regards, and thank you again for giving up part of your Sunday afternoon helping a floundering taxpayer!

[pvb] 19/2/2012 18:35

Thank you Gengulphus for that comprehensive answer.

[gengulphus] 19/2/2012 18:32

pvb,

My guess is that the taxman intends "income" in that quote to mean "taxable income". So for bank interest, it's the gross interest paid by the bank, before deduction of tax; for dividends, it's the dividend paid by the company plus the notional tax credit; for ISAs, it's nothing because income received in an ISA is not taxable; etc.

I should add that as far as I am aware, most of the page you got that quote from ( ) is really about HMRC's policy for sending tax returns to people, not about people's legal obligations with respect to tax. I.e. I believe HMRC are saying that their policy is to send tax returns to everyone receiving £10k or more income from savings and investments, not that everyone receiving £10k or more income from savings and investments is obliged to let HMRC know that they should be filling in a tax return.

What everybody who is not sent a tax return is obliged to do can be stated much more briefly: check whether they're supposed to pay any CGT for each tax year, and check whether they're supposed to pay any more Income Tax than has been deducted at source for each tax year, and if the answer to either question is "Yes" for a particular tax year, inform the taxman of the fact by the October 5th six months after the end of that tax year.

That does of course mean that quite a lot of people getting £10k or more income from savings and investments do need to inform the taxman of the fact if he fails to send them a tax return to fill in, and he will doubtless respond by starting to send them tax returns, since they're in one of the categories covered by the policy.

But if for example someone has a job paying a salary low in the basic-rate band, with the correct amount of tax deducted at source by PAYE, and also has savings in banks paying £10,000 per year interest, of which £2,000 is deducted by the banks and sent to the taxman, and has no other income or capital gains, then all the Income Tax they're due to pay is being deducted at source and they're not due to pay any CGT. And that means that if they're not sent a tax return, as far as I am aware they're not obliged to do anything to rectify the taxman's error in following his own policy.

Gengulphus

[karateboy] 19/2/2012 18:20

David, Please provide me with a link to sample data input to be used with your programme. I found your programme simpler to use than CGT..I am using Microsoft Spread sheet to record my dealings. Is there any maximum number of lines that I should be aware of ?
Thanks

[gengulphus] 19/2/2012 18:00

nightspot,

The answer to both of your questions is "No". Both for the 30 day rule and for Section 104 pooling, it's basically got to be precisely the same type of security. A share and a CFD whose underlying security is that same type of share are not the same type of security.

I don't know a great deal about CFDs, never having used them myself, but I have been told that CFDs are contracts that are individually numbered and so individually identifiable, and that that means that they should be matched up according to the facts about which contracts were acquired and disposed of, not according to the share identification rules. If true, that means that neither the 30-day rule nor Section 104 pools are relevant to them at all. I haven't managed to find any relevant specific guidance from HMRC about how CFDs are matched for CGT purposes, but does say that the share identification rules are for "shares or securities of a company" and "any other assets where they are of a nature to be dealt in without identifying the particular assets disposed of or acquired".

So I'm somewhat doubtful whether the share identification rules are relevant at all to CFDs - but it looks to depend on something I don't have specific knowledge of, namely whether two CFDs over the same share are separately identifiable in some way, or are completely interchangeable like shares, and so I can only describe the doubt, not resolve it one way or the other!

Gengulphus

[mavverick] 19/2/2012 17:32

Gengulphus and Miata thank you for your help and sharing your knowledge. Much appreciated.
(you are right the estate's share prices have not been rocketing like GKP! )

[pvb] 19/2/2012 17:22

The HMRC website states that:

If you don't already complete a tax return, you'll need to do so if you receive any of the following: £10,000 or more income from savings and investments

It doesn't appear to say if this £10,000 is money actually received net, or if it means the grossed up amount - i.e. prior to 20% savings tax and the 1/9 gross up of dividends received.

I would be grateful if anyone here can clarify this. Thanks in advance.