Capital Gearing Share Discussion Threads

[skyship] 10/4/2012 14:06

On the basis of following Peter Spiller, the announcement of CGT's 7% stake in SIGG @ 72.5p could be a bit of a game-changer for that liquidating hedge fund.

Assuming a 5% liquidation discount to 85.7p and an average redemption date of 30th Jun'13 (c60% likely before then and 40% thereafter); then at 72.2p the GRY = 15%.

No reason why the payout shouldn't be more than that 85.7p. If we hit the current NAV of 90.2p then the GRY would be 20%!

Made a top-up in SIGG today @ 72.2p. They look to be outstanding value and will surely reward a little research. Most info on the SIGG thread...

PS - CGT are following in the footsteps of activist player WEISS, who recently took an earlier 13% stake up to the maximum 29.9% - paying 77p to do so.

[bluesbreaker] 10/4/2012 11:59

As of this morning when I try to log on, www.cgtcalculator.com is asking for a username and password. Is this an error or have they introduced a membership/fee-service, and, if so, does anyone know how you subscribe?

Apologies if already addressed. I have scrolled back some way but can't find anything about it.

Tia.

[induna123] 10/4/2012 09:34

Thanks Gengulphus, I've read your explanation about 5 times now and I think I've finally got it. I went to the HMRC website but their explanation was rather confusing to say the least. I've saved your post for future reference. Thanks again.

[miata] 06/4/2012 10:38

Inland Revenue Online - Plumbing new depths of inefficiency.

Self Assessment
Online service offline between 21:00 on Thursday 5 April and 12:00 on Sunday 8 April.

Online service offline between 12:00 and 16:00 on Sunday 8 April.

Online service offline between 16:00 on Sunday 8 April and 06:00 on Wednesday 11 April.

[karateboy] 04/4/2012 21:12

Tanks Gen.. and dave. I am amazed , how deep your knowledge is on CGT issues. Thanks again.

[gengulphus] 02/4/2012 18:53

Yes, that might be a workable shortcut - as long as there haven't been any trades in either IHG or MAB since they were demerged out of Six Continents, about 9 years ago IIRC... If however there have been trades since then - especially sells, but buys muddy the water as well - then the computations will have to be done properly. (And other trades are possible without CGT having been involved before - e.g. for someone who was clearly within their CGT allowance before.)

Gengulphus

[david77] 02/4/2012 13:22

karateboy - I am wary off adding to the expert's advice, but I would just show your original shares sold on the date you sold IHG and MAB. Add the two considerations (qty x unit price) and the two costs, and put that into your tax data. If you explain what you've done, that should keep the tax man happy.

[gengulphus] 02/4/2012 12:28

karateboy,

I'm afraid one of the things the calculators won't do fully for you is corporate actions that involve changing the numbers or types of shares - things like share splits, share consolidations, takeovers for shares, demergers, etc. But you can usually deal with them by constructing input modified for the corporate action. A simple example is that if a share splits 2-for-1, you want to double the number of shares in all previous trades while keeping their total value unchanged by halving their share price. I.e. basically you rewrite the previous trades in term of how many 'new shares' they were for. (Don't take the apparent shortcut of just adding a purchase of the extra shares gained from the split for zero cost - the resulting calculations are highly liable not to be correct as far as the taxman is concerned.)

If you sold shares in the company both before and after the split, you will need to run the calculator once with "old shares" input to get the calculations before the split reported correctly, and another time with "new shares" input to get the calculations after the split reported correctly, then combine the two.

Demergers are rather more complicated. Basically, what you have to do is:

1) Identify which purchases before the demerger have not been matched to sales before the split when calculating gains/losses realised before the split. If a purchase has been partially matched, then you need to split it proportionally - for example, if you have a sale of 100 shares before the split that was matched to 100 of the shares in a 400-share purchase, that gain/loss calculation will have counted it as matched to 100 shares bought for 25% of the purchase cost, and you need to count what's left as the remaining 300 shares bought for the remaining 75% of the purchase cost.

2) Split each of those purchases up into purchases of each of the two new companies, dividing the purchase cost in proportion to the values of the two new holdings at the end of the first day of trading after the demerger. (In the case of the Six Continents demerger, there was an additional complication in the form of the cash return - that requires a three-way split of the purchase cost between the IHG shares, the MAB shares and the cash, in proportion to their values, valuing the IHG shares at 371.375p each, the MAB shares at 221.875p each, and the cash at its actual value, and then treating the actual value of the cash minus the part of the purchase cost assigned to it as an immediately-realised gain or loss.)

3) Then do the CGT computations from then on for each of the two new companies using those split purchases from before the demerger and the actual trades from after it.

It can all be a bit tricky to get right, given various potential problems about fractional entitlements. For example, suppose you have a holding of 200 shares, bought previously in two tranches of 100 shares each, and it goes through a complex demerger that gives you 2 shares in each of the two new companies for each 3 shares that you own, plus some cash. You end up with 133 shares in each of the two new companies, the cash and (probably) fractional entitlement payments for the 2/3rds of a share in each of the two new companies that you lost in the rounding. And you're supposed to regard each holding of 133 shares as half derived from each of the two original purchases - i.e. as two purchases of 66.5 shares each... I don't actually know whether the calculators can handle fractional shares properly - but I do know that if I try using them on such a situation, I'll have to go through the calculation in detail myself to make certain it's correct - at which point I might as well save myself the effort of preparing calculator input and just do the computation by hand!

Put another way, I would generally regard the calculators as good for doing the 90% of CGT computations that are perfectly straightforward and just a matter of applying the rules correctly and accurately, over and over again to a lot of trades. When something gets tricky, like the Six Continents demerger, I doubt their value: the main problem for those computations is that you need to properly understand what you're doing, and the calculators don't really help that understanding.

Also, see for HMRC's guidance about dealing with corporate actions.

Gengulphus

[karateboy] 31/3/2012 23:35

Gengulphus,

One of my holding (Six Continents ) was splited while ago into IHG and MAB and I got shares in both of these companies. So my holdings in Six Continents deleted and I got few shares in IHG and MAB. I sold both of them. Using CGT calculator, I am getting an error message 'There are more sells in IHG and MAB...' How should I treat these sells ?

Thanks

[blowitall] 30/3/2012 16:40

Thanks Gengulphus. I will have a test run with the cgt calculaoter...looks reasonably straightforward after a quick glance.

[kevster4] 30/3/2012 16:13

Thats sounds good, thanks for the reply. was'nt sure if the last day to sell was today. Cgt gets very complicated once uve traded the same share so many times. Its hard to know what is actual profit.

[gengulphus] 30/3/2012 15:59

blowitall,

There are links to a couple of free CGT calculators in the thread header.

Yes, any trades you do in an ISA are completely ignored by CGT, so buying back immediately inside an ISA won't trigger the same-day or 30-day rules.

KEVSTER4,

Last day of the tax year - i.e. Thursday April 5th. And before you ask, yes, it is the date you do the trade that counts, not the later settlement date, so you can sell shares to get the gains and losses into the current tax year right up to and including next Thursday.

Gengulphus

[kevster4] 30/3/2012 15:47

when is the last date to sell some shares for this years CGT allowance. Help would be appreciated.

[blowitall] 30/3/2012 14:39

Can anyone help me?
Until recently my accountant of old has done my cgt calculations but he is too costly and I need to do them myself (it will be mainly losses this year if I am forced to sell any). Is there any user friendly software available? I try not to trade very much but do sometimes and the calculations seem daunting. I have basic exel skills but setting it all up to do the necessary could take me a very long time. Does anyone have a spead sheet they could share/show me? I know I am being a tad lazy but any help would be very useful and very greatfully received. Also, can I sell out of my trading account and use the profits to offset against my annual allowance and then buy back immediately into an ISA account?
TIA

[fk2] 28/3/2012 21:11

Thanks guys for all your help,the more I hear the more complex it becomes.
The gift I was thinking of making will stay on the back burner.
Now it's explained it dosen't serve the purpose I thought it would.

FK2

[gengulphus] 28/3/2012 18:15

Basically, whether a loss is claimed or not makes no difference at all to who realised it, when it was realised or how much it is. If you give your daughter the shares, you realise the loss you've taken from what you paid for the shares at that time, and whether you claim the loss or not doesn't change that fact in the slightest.

The only difference claiming the loss makes is whether your loss is usable - it cannot be used until it has been validly claimed, and if you delay past the deadline for claiming it, it can no longer be validly claimed and so isn't usable at all. I.e. your choice is between claiming the loss and having it be usable as a clogged loss, only against future gains realised on disposals to the same daughter, or not claiming the loss and having it be completely unusable. Your daughter cannot claim or use the loss at all, because she didn't realise it.

That is, if you have a choice at all. If you have to complete a tax return, and you're obliged to fill in the Capital Gains Summary supplementary pages by any of the criteria listed under "Capital gains summary" on page TRG5 of , then you have to give details of all the gains and losses you realised during the tax year, and that means that you have to claim all of the losses you realised. Deliberately leaving a realised loss out means that the declaration you make at the end of the return that "The information I have given on this tax return and any supplementary pages is correct and complete to the best of my knowledge and belief" is a false one - and making a false declaration to the taxman is not a good idea!

Gengulphus

[miata] 28/3/2012 15:18

Your daughter has no loss to claim.

(Only transfers to spouses are at original cost).

[fk2] 28/3/2012 14:21

Gengulphus
Thank you for such a comprehensive reply, the shares are making a loss
and I won't be atempting to claim that loss I,ll leave that to my daughter
if she ever sells them to offset against any gains she makes I didn't know how to record them. I did think when they were gifted the recipient would record the price the shares originally cost.

FK2

[gengulphus] 28/3/2012 10:18

FK2,

As MIATA's link indicates, there's no stamp duty to pay.

As far as recording it is concerned, the pedantic answer is that your records should be accurate. It's not a sale and should therefore not be recorded as a sale; instead, it's a gift and so should be recorded as a gift.

But I suspect the answer you're really after is how it should be treated for CGT purposes. There are three parts to that answer:

* It is a disposal of the shares, so must be matched to your acquisitions of the shares just like a sale or any other disposal.

* The "market value rule" applies to it, both because the disposal is to a "connected person" and because it is not a normal commercial "bargain at arm's length" (by the way, either of those on its own will cause the "market value rule" to apply - e.g. it would apply to any disposal to your daughter regardless of the nature of the disposal, and it would apply to any gift regardless of who was the recipient). (Edit: except if the recipient is your spouse or civil partner, because the "no gain / no loss rule" that applies to transfers between spouses and civil partners trumps the "market value rule".)

When it applies, that rule says that you ignore how much (if anything) was paid for the shares when you calculate the gain or loss. Instead, you calculate the gain or loss as though the recipient had paid you the market value of the shares (and correspondingly, when the recipient eventually disposes of the shares, they calculate their gain or loss as though they'd paid you that amount).

So when you make the gift, you need to take a note of the market value of the shares at the time, and both you and your daughter need to do your CGT calculations as though she had paid you that amount for them.

* If your CGT calculation results in a loss, the "clogged loss rule" comes into effect because your daughter is one of your "connected persons" (for completeness, the "not a bargain at arm's length" condition is only relevant to the "market value rule", not to this one).

That rule says that when you realise a loss on a disposal to a "connected person", that loss is only usable against gains realised on other disposals to the same "connected person".

I.e. if the market value of the shares when you give them to your daughter is below what you paid for them, you will realise a loss, but you'll find it hard to offset that loss against gains, because it can only be offset against gains realised in other transactions with the same daughter. Those gains don't have to be realised at the same time - once the loss has been "claimed" by telling the taxman about it, a clogged loss will be carried forward from tax year to tax year until it can be used or until the taxpayer dies, just like any other loss. But with a clogged loss, the chances of it being carried forward until the taxpayer dies are obviously rather higher because it is much harder to use.

Gengulphus

[fk2] 28/3/2012 09:32

Miata, Thanks

[fk2] 27/3/2012 22:14

Gengulphus, Help please, If I transfer some shares to my daughter at nil cost
do I have to pay stamp duty? & do I record it as a sale. The shares are held in a nominee acct with Halifax, and my daughters acct is Halifax.
Halifax transfer form E states, if the consideration of the transfer exceeds
£1000.00 I have to complete a Stock Transfer Form, available by ringing them.
As I may be liable to stamp duty. Even if the value of shares are greater than
£1000.00 isn't the consideration nil.

[gengulphus] 24/3/2012 12:43

Say for example I sell 1000 shares in a stock i've been holding for months and make £10k profit, then I buy another 1000 shares in the same company within 30 days but the share price has now risen and cost me an extra £5k, is it classed as the same investment but now I'm only £5k in profit rather than £10k?

No, you're classified as having realised a £5k loss and now having an unrealised gain of £15k on your holding.

For example, suppose you:

A) Originally bought 1,000 shares at £10 each, for £10k invested (*).

B) Later sold those 1,000 shares at £20 each, for £20k withdrawn from the investment.

C) Later yet bought 1,000 shares at £25 each, for £25k invested.

If buy C) occurrs within the next 30 days after sell B), then the 30-day rule says that sale B) is "matched" to buy C). So the realised gain or loss is (sales proceeds from sale B) minus (amount paid for buy C), i.e. £20k - £25k = -£5k, a £5k loss.

And the unrealised gain or loss is (current value of holding) minus (amount paid for as-yet-unmatched buys). Since the as-yet-unmatched buys are just buy A, that is £25k - £10k = £15k.

(*) I'm ignoring trading costs to keep this example simple - do take them into account in your real-life CGT computations!

But If I bought those 1000 shares after 30 days then the £10k profit still stands and then the new 1000 shares are now classed as a different investment?

Basically yes - if buy C) were at least 31 days after sell B), sell B) would instead be matched to buy A), realising a gain of £20k - £10k = £10k, and the as-yet-unmatched buys would be just buy C), so the unrealised gain or loss would be £25k - £25k = £0.

But "classed as a different investment" isn't a very helpful way of thinking about it - just work in terms of which buys have been matched to sells so far. The reason why it isn't helpful can be seen by looking at a slightly different example - suppose you:

X) Originally bought 2,000 shares at £10 each, for £20k invested.

Y) Later sold those 1,000 shares at £20 each, for £20k withdrawn from the investment.

Z) Later yet bought 1,000 shares at £25 each, for £25k invested.

If buy Z) occurs within the next 30 days after sell Y), then sell Y) is matched to buy Z) and you realise a loss of £20k - £25k = -£5k, while your unrealised gain is £50k - £20k = £30k. If on the other hand buy Z) occurs 31 or more days after sell Y), then sell Y) is matched to half of buy X, so you realise a gain of £20k - (0.5*£20k) = £10k, and you have an unrealised gain of £50k - (0.5*£20k + £25k) = £15k.

So there's the same basic situation of the number of days between the sell and the subsequent purchase making a difference to whether you realise a £5k loss or the £10k gain - but in the second example you've held at least 1,000 shares at all times from the initial buy onwards, which isn't really compatible with regarding things as "different investments"...

Basically, just treat the way the computation is done as a set of rules that you (or the CGT calculator you use!) have to follow, whether or not they really make sense...

Gengulphus

[induna123] 23/3/2012 10:20

Say for example I sell 1000 shares in a stock i've been holding for months and make £10k profit, then I buy another 1000 shares in the same company within 30 days but the share price has now risen and cost me an extra £5k, is it classed as the same investment but now I'm only £5k in profit rather than £10k?

But If I bought those 1000 shares after 30 days then the £10k profit still stands and then the new 1000 shares are now classed as a different investment?

[miata] 23/3/2012 10:11

Broadly. For the detail see: