Capital Gearing Share Discussion Threads

[miata] 20/4/2012 09:29

1)No - provided realisations are less than four times the allowance (ie £42,400)
2)No
3)You can potentially make the amount of the personal allowance plus the CGT annual exempt amount before paying tax.

[gengulphus] 19/4/2012 20:36

sirraman,

I think probably the best thing to do is refer you to a discussion on this thread a while back, in some of posts 205-217 . It basically contains everything I know or have been told about CGT as it applies specifically to CFDs!

Gengulphus

[sirraman] 19/4/2012 16:48

Gengul - good work on this site !

Have started trading CFDs this year ... assuming one makes a gains above the 10.6k limit....how is this submitted to the taxman. CGTcalculator is great for normal share trades....but with CFDs there could be hundreds of trades and could end up with a lot of work and reams of paper

Will the taxman accept say a year end summary of P&L statement from IG Mrkets that includes costs, buy /sell prices and profits / losses for each trade...and gives total loss or gain as the case may be. ?

Or is there a simple spreadsheet like CGTcalculator especially for CFDs..

Thanks in advance

Sirra

[gengulphus] 19/4/2012 10:32

MIATA,

Agreed that losses can happen quite rapidly, but equally most shares don't move all that much in most months. And bed-and-spousing is generally intended not to exploit share price opportunities, but specifically to realise gains and losses while not changing the couple's exposure to share price changes.

So specifically, I'd be thinking in terms of doing fairly normal trading through most of the tax year. If a sale seems to be urgent, do it immediately, even if it pushes the spouse who currently owns the share over the CGT allowance - you've a decent chance of being able to compensate with losses later. If a share is getting close to a sale, but not there yet, and the gain or loss realised on it would be better taken by the spouse who doesn't currently own it, transfer it to that spouse - who then sells it if and when it reaches the point that you wish to sell it. They don't have to wait 31 days after the transfer to do such a sale, because it's not going to be a bed-and-spouse transaction and in particular isn't going to involve a repurchase of the same share: the need for a 31-day wait after the transfer for a bed-and-spouse transaction is driven by the repurchase by the original owner of the transferred shares, not by the sale by the spouse they were transferred to.

In addition, about 6 weeks before the end of the tax year, assess the CGT position of each spouse with regard to gains and losses they have already realised in the tax year, and also which of their collective holdings have significant unrealised gains and losses on them. Transfer such holdings between them as needed to put them in a position to realise the gains or losses they need - gains if they're short of their CGT allowance, losses if they're over it. To safeguard against major, plan-disrupting share price movements in the 31 days that you need to wait before a bed-and-spouse transaction, try to give them more than one option to achieve the desired gains and losses.

Then after 31 days have elapsed since the transfers, in the last week or so of the tax year, make the final decisions on the desired bed-and-spouse transactions (which will depend on what the current share prices are, so can only be provisionally decided earlier) and actually do those transactions.

It's not completely bulletproof - enough shares undergoing major price movements during the 31-day wait will disrupt it - but it should have an excellent chance of achieving the desired result.

Incidentally, if anyone is wondering why I say significant unrealised gains and losses above, it's because bed-and-spouse transactions on small unrealised gains and losses tend to cost more in trading costs than they save in tax. E.g. realising a 5% gain or loss with a bed-and-spouse transaction can only save you 0.9% or 1.4% of the value of the shares traded in tax, depending on whether you pay CGT at 18% or 28%. That might just about be worthwhile if you can get the trading costs lower and the tax savings are fairly immediate (i.e. you're realising losses to reduce gains that are above the CGT allowance), though not by much. It almost certainly isn't worthwhile if the tax savings are at an unknown and possibly distant point in the future - i.e. if you're realising gains to use up your CGT allowance, which doesn't save any tax in that tax year, but instead just reduces your total unrealised gains in the hope that some future CGT bill will be reduced by not having realised those gains in the tax year concerned.

Gengulphus

[miata] 18/4/2012 08:42

Gengulphus,

The reality is that losses often occur suddenly (eg Tesco 20% drop recently and the banks drop previously).

[gengulphus] 17/4/2012 19:11

MIATA,

A problem would arise when the shares in one had large gains and the shares in the other had small gains or losses. Buying half quantities in each would solve this but would be expensive in terms of transaction costs per share.

And half quantities in each would also make it more difficult to use the bed-and-spouse technique - you would have to do it in two installments, at least 31 days apart.

But isn't there a better solution to the situation you describe? The couple monitor their unrealised gains and losses, and if they start to become too unbalanced, the spouse with large unrealised gains transfers one or more of the holdings to the spouse with few unrealised gains, and maybe the latter transfers loss-making holdings back. Then they make certain that any bed-and-spouse transactions on those transferred holdings are done at least 31 days after the transfer.

With a bit of care, they should be able to arrange to each have a good mix of unrealised gains and losses available at just about all times - possibly not quite all if enough sudden leaps or collapses in share prices occur during the 30 days following a re-balancing transfer, but I'd have thought that would be very rare with a reasonably diversified portfolio.

Nil Pd,

The only CGT calculators I'm aware of are the two linked to from my thread header - see the top of this page.

Gengulphus

[bonnylad] 17/4/2012 18:13

Gengulphus & Miata

Grateful for your further explanations of the possible sole/joint account options. As you say, it's not a straightforward decision.
I will probably still go for the simpler joint account only option. If we were then to be so fortunate as to find ourselves at some point with a 'CGT time bomb' then I guess I'd be so pleased to be in that situation that I'd be relatively happy to pay the CGT!

[nil pd] 17/4/2012 17:31

Need help please!

Can anyone direct me to a CGT calculator of the type where I can punch in all my bought and sale trades?

In one company I have a total of 266 trades (some matching, others not). So what I'm looking for is a spread sheet where I can punch in the numbers and have it will tell me what my taxable gains/losses are. I can't do it manually given the rules to apply!

I don't need the tax rates applicable on the gains, just need to know what the cash sums are.

[miata] 16/4/2012 10:02

Two sole accounts are worth certainly considering.

A problem would arise when the shares in one had large gains and the shares in the other had small gains or losses. Buying half quantities in each would solve this but would be expensive in terms of transaction costs per share.

[gengulphus] 16/4/2012 09:28

bonnylad,

You might want to consider the option of opening a separate sole account in your wife's name, transferring half of your holdings into it and keeping your existing sole account, instead of opening a joint account, transferring all your holdings into it and closing your existing sole account.

The advantage of doing it that way is that you get more control over the capital gains and losses you realise. In particular, one of you can sell a holding and other buy it back at nearly the same time, causing the first to realise the currently-unrealised gain or loss on that holding without your collective holdings having to change (a technique sometimes known as "bed and spousing"). That cannot be done with just a joint account, because you end up each being responsible for half the sale and half the repurchase, and the 30-day rule then results in you only being counted as realising the short-term trading gain or loss, not the unrealised gain or loss on the original purchase.

The disadvantages of doing it that way are that keeping track of two accounts is a bit more complex than keeping track of just one, and that the separate sole accounts require you to keep track of who has realised which gains and losses and keep each of you within your own CGT allowance, rather than simply knowing that you will each be responsible for half the realised gains and losses. (Though that last can eventually become an advantage if you get into a position where you are realising more than twice the CGT allowance in net gains, and one of you will pay CGT on the excess at a lower rate than the other, since it allows you to allocate the excess gains to the one with the lower CGT rate.)

I'm not saying that two sole accounts are a better solution than a joint account - how the advantage and disadvantages I describe above balance out depends on individual circumstances and preferences. For example, if you're sitting on a "CGT time bomb" - a holding with massive unrealised gains on it, that could dump a big CGT problem on you if you were forced to realise the gain by a cash takeover - then the opportunity to use "bed and spousing" to reduce that unrealised gain while you've got spare CGT allowance is rather more useful to you than if you're not sitting on such a time bomb.

So basically I'm only saying that two sole accounts are worth considering as an alternative to the joint account. Only you can say what the results of that considering are!

Gengulphus

[bonnylad] 14/4/2012 11:58

Miata - thanks for the clarification
I will definitely now open a joint share trading account and transfer from the old account into the new!

[miata] 14/4/2012 11:35

"will the total cgt allowance now be £21,200 for the 12/13 Tax Year?"

Not exactly, but the effect will be.

By opening a joint account you will in effect be transferring the ownership of half of your transferred shares to your wife and the gains will be split equally between you. So on any sale she will make half the gain and can set this against her annual exempt amount.

Transfers to spouses are at original cost.

[bonnylad] 14/4/2012 11:04

I have a share trading account in my name. For the 11/12 tax year I need to pay cgt on the gains made becasuse they exceed the £10,600 allowance
I am considering opening a new joint share trading account with my wife, transferring my remaining shares to this new joint account and then closing my original account. If I then sell (assuming they make gains) these transferred shares from this new account during the 12/13 Tax Year, will the total cgt allowance now be £21,200 for the 12/13 Tax Year?

[daytraders] 13/4/2012 13:25

Cheers again.

[daytraders] 13/4/2012 12:37

Me again, can i also have confirmation that trades done in my sipp do not have to be listed when doing my self assessment online, cheers

[captainfatcat] 12/4/2012 17:45

Small business accounting software, is anyone here give any feed back on Quickbooks or Freeagent? Any other recommendations gladly received.

TIA

[daytraders] 12/4/2012 16:19

Thank you, Yes to deal date correct ?

[daytraders] 12/4/2012 13:53

Hi guys, i just need confirmation on something for my tax year 11/12 cgt, i think i am right in saying i do not need to add any details of a share buy i made on 2 march 2011 until i actually sale them, is this correct, cheers

just to add, when doing cgt is it the deal date that counts or the settlement date.

[bluesbreaker] 10/4/2012 18:52

Ah, yes. Back up again. Thanks MIATA.

[miata] 10/4/2012 17:21

295, Server back up.