Capital Gearing Share Discussion Threads

[gengulphus] 22/1/2013 20:07

here and there,

I hold a lot of one company that I have bought at a range of different prices. i sold some of it. which purchase can i put against it? any of them that i chose?

You don't get any choice, and to deal with one incorrect answer you've been given, the last day that the answer was determined on a 'most recent one' basis was 5 April 2008 - and even then, it wasn't always determined on that basis: the rules were more complex than that, and 'the most recent one' was merely the most common answer they produced.

Using the CGT calculators is a good answer; you might find my reply just above to bobdobalina helpful in understanding the results they produce.

bobdobalina,

I should add to my previous reply that using the CGT calculators is a useful option for you as well. To do so, put the transfer to your wife into your CGT calculation as a 'sale' for £0.00. That will produce one or more corresponding losses in the calculator output (more than one should only occur if you acquire shares on the same day as the transfer or the following 30 days). Locate those losses, add them together, and change the 'sale' to be for the total amount lost, then re-run the calculator. As a double-check, locate the gains/losses corresponding to the transfer in the revised output: if there is only one of them, it should be for £0.00; if more than one, they should add up to £0.00.

Once you've got the 'sale' in your CGT calculation correct by that method, then put a 'buy' for the same amount into your wife's calculation.

If you want to use this method, never transfer shares between you and your wife and then transfer shares of the same type in the opposite direction at any time in the following 30 days. If you were to do that, you're liable to find that each time you get one transfer right by this method, it causes the other to go wrong!

Gengulphus

[david77] 22/1/2013 19:37

6 April 2008
There are two calculators on www.stonebanks.co.uk
Option 2 uses pooling from 6 April 2008
and Option 3 uses LIFO for CGT returns before that date.

[gengulphus] 22/1/2013 19:32

bobdobalina,

While you're being so helpful another question - I've bought the shares,all in the same company,obviously at a lot of different prices,is it a LIFO situation or an average purchase price on the transferred shares ?

Definitely not LIFO; average purchase price is a possibility but needs more explaining...

When you transfer them, you will be disposing of them under the current rules, including the rules for identifying which shares you dispose of. The special inter-spouse transfer rules don't stop it being a disposal and don't interfere in any way with the normal rules for identifying which shares you are treated as having transferred to her. They just say that regardless of whether she pays you for them or what she pays you if so, both your CGT calculations and hers treat her as having paid you your total allowable costs for the transferred shares. The result of that is that your gain or loss ends up being calculated as your allowable costs minus your allowable costs, i.e. zero, while she ends up with the same allowable costs as you had on them.

The current rules for identifying the shares you dispose of are, in highest-to-lowest priority order:

1) The same-day rules, which apply if you acquired the same type of shares on the disposal day.

2) The 30-day rules, which apply if you acquired the same type of shares in the next 30 days after the disposal day. (That's calendar days, by the way, not trading days.)

3) The Section 104 pool rule, which says that you dispose of shares from your 'Section 104 pool' if neither of the previous two rules applies. That 'Section 104 pool' consists of all shares you have previously acquired that have not been identified as the shares disposed of in a previous disposal, and a disposal from it is basically done at the average cost of all those shares. (It's actually easier to record the total number of shares in the pool and their total cost rather than the total number and average cost per share, by the way - it's equivalent information in theory, but you end up doing less and simpler arithmetic on it.)

So the LIFO rule definitely doesn't get involved directly, but average purchase price isn't necessarily right either. The two reasons why it might not are:

* You acquire more shares of the same type either on the day of the transfer or on any of the following 30 days. In that case, the same-day or 30-day rules will apply instead, possibly causing the price used for the transferred shares to be very different from your average purchase price.

* There might be past disposals that took some past purchases out of the Section 104 pool and so make its average purchase price different from the average purchase price for all your past purchases. In particular, any past disposal before 6 April 2008 is very likely to be of that type.

As a result, the only simply-described situations in which you just use the average cost of all your past purchases are those in which you do not acquire more shares of the same type on the day of the transfer or any of the following 30 days and:

EITHER there have been no past disposals

OR there have been past disposals, but the earliest of them was on or after 6 April 2008 and there have been no acquisitions on the same day as or since that earliest disposal.

Gengulphus

[liquid millionaire] 22/1/2013 18:58

Quick questions if i may Gengulphus ref: pooling. How long ago was pooling re-introduced to replace LIFO? What are the main implications as you see them? Any pitfalls to think about? Any other comments on pooling that are useful in you book would most helpful. Thanks.

[david77] 22/1/2013 13:04

Yes - it will take you 15 minutes - use Wordpad or Notepad and save as a txt file.

For the stonebanks calc:

Company
deal
deal
deal
etc

where each deal is

date, b or s, quantity, price/share ( pence ), consideration(£.p)
where date is in format ddmmyy or dd/mm/yy
b or s is for buy or sell

The fields are separated with commas

The deals can be in any order - the prog will sort them into date order.

[here and there] 22/1/2013 12:19

thanks for your help.

I made 27 purchases over 2 years before the first sale. do i have to input every purchase?

[david77] 22/1/2013 11:55

I would suggest using one of the calculators

option 2 on www.stonebanks.co.uk
or www.CGTcalculator.com

Did you buy back within 30 days of a sale? The calculators will do it for you and it's not difficult to produce the input file.

[orchestralis] 22/1/2013 11:53

The most recent I believe

[here and there] 22/1/2013 11:42

Pleas help!!

I am calculating my capital gains/losses.

I hold a lot of one company that I have bought at a range of different prices. i sold some of it. which purchase can i put against it? any of them that i chose?

[bobdobalina] 21/1/2013 20:40

Gengulphus
A massive thank you for your very detailed reply to my question,really appreciate the time taken.
While you're being so helpful another question - I've bought the shares,all in the same company,obviously at a lot of different prices,is it a LIFO situation or an average purchase price on the transferred shares ?
Many thanks again
Rob

[gengulphus] 21/1/2013 20:16

bobdobalina,

Each of you has a £10,600 CGT allowance this tax year - i.e. each of you can make that big an overall capital profit this tax year without any CGT being payable. If you make more than that, you will be taxed on the excess over the allowance. The rate at which each of you is taxed depends on their Income Tax situation.

Your wife's earnings of £140 per week is a bit over £7,000 per year, and she has an Income Tax personal allowance of £8,105 this tax year (assuming she is under 65 - it's more if she is 65 or more). If her taxable income (i.e. not just earnings, but also interest, dividends, etc, excluding untaxable stuff like interest on cash ISAs) is also below her personal allowance, then she can get up to £34,370 worth of capital profits in excess of the CGT allowance taxed at 18%, then any further profits beyond that are taxed at 28%.

That figure of £34,370 is her completely-unused Income Tax basic-rate band. If her taxable income is above the £8,105 personal allowance, it gets reduced on a pound-for-pound basis. For example, if her taxable income were £9,000, then she would use £9,000 - £8,105 = £895 of her basic-rate band on income, and so she would only be able to get £34,370 - £895 = £33,475 of capital gains in excess of the CGT allowance taxed at 18% before moving on to 28%.

If her taxable income is below the £8,105 personal allowance, by the way, the unused part of her personal allowance cannot be used to save her CGT in any way.

All of those rules also apply to you, but I assume from the fact that you don't also say that your income is low that the amount of excess capital gains you can get taxed at 18% rather than 28% is lower, or even zero if you're a higher-rate taxpayer and so don't have any unused basic-rate band.

So in the absence of the further measures I'll describe below and assuming your wife's taxable income is below her personal allowance or not much above it, the best you could do on a sale this tax year that produced a gain of £50,000 would be to keep £10,600/£50,000 = 21.2% of the shares yourself and transfer the remaining 78.8% of them to your wife, then each of you sell. (The order is important: when you sell, the capital gain becomes 'attached' to the owner of the shares at the time (or half to each of you if they're in a joint account when sold) and cannot afterwards be transferred between you.)

That would result in you having a £10,600 gain, covered completely by your CGT allowance, and your wife having a £39,400 gain, of which £28,800 would be in excess of her CGT allowance. That excess capital gain would be within her unused basic-rate band, so would all be taxed at 18%, resulting in a CGT bill of 18% * £28,800 = £5,184 for her.

Now for the further measures. The most obvious one is that if you can split the sale between tax years and are willing to take the risk of the share price falling, you can each use both this year's allowance and next year's. E.g. if the 2013/2014 tax year's CGT allowance and rates are the same as this year's (which I don't think is known yet), you could transfer enough shares to your wife now for her to sell for a £10,600 gain and sell the same number yourself, and both gains would be within the CGT allowance, so no CGT bills for this tax year. Then on or after April 6th, you could keep enough shares to realise another £10,600 gain yourself, while transferring the rest to your wife for her to sell. If the share price were unchanged by that point, you would still end up making £50,000 gains, but four lots of £10,600 gains would be untaxed, and so your wife would end up paying 18% on only the remaining £7,600 of capital gains, for a £1,368 CGT bill. (Or you could even wait a further year to sell the shares that produce that last £7,600 of capital gains, which would make the 2014/2015 tax year's CGT allowances usable as well and so eliminate the CGT bill entirely - unless of course the share price rises steeply and so increases the gain further, but having to pay CGT because of that would beva very nice problem to have!)

The other thing to mention is other capital gains and losses. If you've already made other capital gains this tax year, they'll increase the amount of capital gains you have to deal with, and similarly, if you've already made capital losses this tax year, they'll decrease the amount of capital gains you have to deal with. Again, that applies equally to any gains or losses your wife has already made this tax year - and as with already-realised gains, you cannot transfer already-realised losses between you.

You might also have the opportunity to make further gains and losses this tax year. Making further gains is not going to help your CGT situation, so avoid doing so unless there is a good investment case for doing so (but if there is such a case, sell snd pay the extra CGT: there's an old saying "never let the tax tail wag the investment dog" for such situations!). But making further losses could be very helpful - for example, if you happen to have a Lloyds holding bought several years back for £5,000 and it's now worth £500, then selling it for a £4,500 loss would allow you to transfer fewer shares to your wife and make a £4,500 greater gain (i.e. £15,100 rather than £10,600) yourself. That would reduce the gain made by your wife by £4,500, which would reduce her CGT bill by 18% * £4,500 = £810 - unless of course it had already been reduced to zero by being split over three tax years.

You might also be able to use losses made in past tax years and carried forward to the current tax year. That will be the case for a past tax year if all of the following three conditions are true:

* The first condition is that you made more losses than gains in that tax year - if so, the excess of the losses over the gains can be carried forward. That's because losses have to be used against gains made in the same tax year if at all possible: the only way for losses to start being carried forward is if they cannot be used against any gain - and the only normal way that happens is if the gains have all been used up.

* The second ondition is that you 'claim' the losses by telling the taxman about them within a time limit. That time limit is now the end of the 4th tax year after the tax year in which you made the losses, so if you made the losses before the 2008/2009 tax year, you're now out of luck (unless they were made much earlier - there's a cut-off date in the 1990s before which this rule about 'claiming' the losses doesn't apply). And if you made the losses in the 2008/2009 tax year, get your skates on: you only have until April 5th to tell the taxman about them.

I should say that I'm assuming you haven't already 'claimed' the losses. If you have, then as long as it was done within the time limit for the tax year concerned, they'll then remain available for use until actually used.

* The third condition is that the carried-forward losses haven't already been used up by an intermediate tax year. Using them up will only happen if the gains for that tax year were in excess of the losses for that tax year plus the CGT allowance for that tax year, and only to the extent of that excess.

If all three of those conditions are the case, you will probably be able to use the carried-forward losses. Otherwise, don't bother!

Finally, just in case of any bright ideas about having other family members you could transfer shares to and get to sell the shares using their CGT allowances: as a general rule, that doesn't work, because the technique relies on a special rule for transfers between spouses and civil partners. If you try it with others, the transfer itself makes you liable to CGT.

There is however another special rule that has a similar effect, called gift holdover relief. It only works on gifts - i.e. you mustn't be expecting anything in return - and it only works on 'unlisted' shares in trading companies (i.e. not investment companies, property companies, etc). Quite a few AIM shares qualify for it, because being on AIM doesn't make a share count as 'listed' - but if the company is also on another stock exchange, that might well make it count as 'listed'. So a somewhat tricky one to use, and having to be a gift might well make it of no interest anyway, but it seems worth mentioning. If it is of interest, see for details.

Gengulphus

[bobdobalina] 21/1/2013 07:47

Appealing for help...
Thinking of transferring some shares into the wife's name ASAP,she only earns £140 per week,this amounts non taxable I've been told,just wondering if anybody knows the thresholds and percentages she'd pay if we made a sizeable 50k ish profit.
Also any loopholes,different ways of transferring which may save tax ?
All help much appreciated
Thanks
Rob

[mcbryde2] 18/1/2013 19:40

I got the answer [in case anyone's interested!].
Once the online form is submitted attachments cannot be removed. Only the technicians can do that for you.

[mcbryde2] 17/1/2013 21:05

Sorry - I'm coming in here out of context - so I don't mind if you shun me!

My question: Does anyone know how I can delete an attachment from the online self assessment [which has been submitted?

I seem to have been able to delete the comment connected with the attachment, and it says I can do it ["amend attachments" on the 'check your return' page].
But when I go to the attachment page there isn't tick box beside the attachment I want to delete. [I think there were tick boxes there before I submitted...]

Maybe it isn't possible....

Thanks for reading.

John

[red nutter] 14/1/2013 21:09

Got it - silly me!

Thanks!

[gengulphus] 13/1/2013 23:47

red nutter,

My share account shows I bought 3395 shares for £1012.33 and sold 678 (after restructure, 678*5 = 3395) for £214.09 which I calculate as a real loss of £798.24.

BUT Using CGT calculator I get a loss of £1011 as follows:-
...
S 05/05/2011 UNIVERSAL 678 0.0031 0 0

I think you've just become the latest victim of the classic computer ailment GIGO - Garbage In, Garbage Out. You say that you sold 678 shares for £214.09, which is somewhat over 31p per share - but your input data says you sold them for £0.0031 = 0.31p per share, i.e. 1/100th as much. So the calculator reckons you sold the shares not for £214.09 but for £2.14, realising a loss of £1012.33 - £2.14 = £1010.19, which rounds in your favour as £1011.

If you correct the input data, you should get a more accurate result...

Gengulphus

[red nutter] 13/1/2013 20:59

Hi - hope someone can clarify something for me:-

My share account shows I bought 3395 shares for £1012.33 and sold 678 (after restructure, 678*5 = 3395) for £214.09 which I calculate as a real loss of £798.24.

BUT Using CGT calculator I get a loss of £1011 as follows:-

R 10/10/2010 UNIVERSAL 0.19999
S 05/05/2011 UNIVERSAL 678 0.0031 0 0
B 18/04/2006 UNIVERSAL 3395 0.2945 7.5 5

3395 were converted to 678 shares results in Loss of £1011:-

1. SELL: 678 UNIVERSAL on 05/05/2011 at £0.0031 gives LOSS of £1,011.00
Matches with:
BUY: SECTION 104 HOLDING. 678 UNIVERSAL shares of 678 bought at average price of £1.49311
CALCULATION: Loss = £1,011.00 = ( 678 * 0.0031 - 0.00 )
-1012.32858

Is CGT calcultor right - if so how come?

Thanks

[gengulphus] 12/1/2013 17:19

Liquid Millionaire,

I should add that if the shares count as 'unlisted', the donor and donee may be able to make a joint claim for 'holdover relief'. When that is possible and is actually done, the donee accepts responsibility for the donor's gain and the donor is released from that responsibility, which produces a similar effect to the rules for transfers between husband and wife or between civil partners. For details, read .

Gengulphus

[gengulphus] 12/1/2013 17:04

Liquid Millionaire,

If you make a gift of shares for no value [i.e. £100K worth of shares] how is that treated for tax purposes?

Firtly for the donor and secondly for the donee?

For CGT, there are two cases:

* If donor and donee are each other's spouses or civil partners, they are both treated for CGT purposes as though the donee had paid the donor an amount equal to the total of the donor's allowable costs for the shares. The result is that the donor realises neither a gain nor a loss, and the donee's allowable costs afterwards are what the donor's allowable costs were beforehand. This case applies to any transfer directly between husband and wife, or between civil partners - even one where market value is paid to the transferor by the transferee. If they actually want a gain or loss to be realised, they have to do it indirectly, via a third party such as a market maker.

* If donor and donee are not each other's spouses or civil partners, the 'market value' rule comes into play. This applies to any transaction that is not a normal "at arm's length" commercial bargain, so will always apply to a gift, and says that both parties are treated for CGT purposes as though the donee had paid the donor market value for the shares.

If the donee is a "connected person" of the donor - which broadly speaking means a close relative, business partner or similarly financially closely associated person (look up the exact definition if in any doubt!) - two further factors come into play. Firstly, the market value rule applies to any transaction at all, even if it is a normal "at arm's length" commercial bargain. Secondly, if the transaction realises a loss, it becomes a "clogged loss", which means that it can only be used against a gain realised on another transaction with the same connected person.

Gengulphus

[royaloak] 11/1/2013 09:16

Gengulphus re listed / unlisted

Many thanks for that reply as usual. I have always found the listed/unlisted area confusing, and their information contradictory in places. At the end of the day I guess the total figures would be the same whether as shown as all listed or listed and unlisted. I will therefore continue to interpret things as I have been.

Thank you yet again.

[liquid millionaire] 10/1/2013 18:15

Gengulphus

If you make a gift of shares for no value [i.e. £100K worth of shares] how is that treated for tax purposes?

Firtly for the donor and secondly for the donee?

Thanks.

[gengulphus] 10/1/2013 14:19

royaloak,

I cannot comment on the passage you've quoted - I don't know what context it appears in.

But I do know what HMRC's instructions for completing the Capital Gains Summary supplementary pages say about the issue. They're at and the relevant part on page 18 says:

==========

Listed shares and securities

For the purpose of completing these pages only 'listed shares and securities' means any of the following:

• shares or securities of a company listed on a recognised stock exchange throughout the period you owned them – ignoring any period when the listing or quotation was temporarily suspended – go to www.hmrc.gov.uk for more details

• shares in a company that was a UK open-ended investment company (OEIC) throughout your period of ownership

• units in a unit trust that was an authorised unit trust, throughout your period of ownership.

Unlisted shares and securities

For the purposes of these pages only, any shares or securities not within the 'listed shares and securities' definition above. Shareholdings in Alternative Investment Market (AIM) companies are regarded as 'unlisted'.

==========

Note in particular the "For the purposes of these pages only" qualifications - they suggest that there are one or more other definitions of "listed" that apply for other purposes. My guess is that what you've found is one of those other definitions.

In any event, I would follow what that passage says (*): the taxman can hardly blame you for filling in a tax form in accordance with the taxman's own instructions for filling it in!

(*) Where possible, that is! It's not helpful about companies that are both listed on an overseas recognised stock exchange and traded on AIM, as it says both that they are "listed" and that they are "unlisted"... To resolve that, you have to look elsewhere - and it seems that they count as "listed" in other contexts. So that's the one I would follow, as you have been doing.

Gengulphus

[royaloak] 10/1/2013 12:19

Hi Gengulphus

I have always as a rough guide shown two sets of returns for my CGT calculation, listed and unlisted, as a rough guide I have classed AIM shares as unlisted, unless they are also quoted on an overseas market.

However I have noted below the comments from the HMRC so as I have no private companieds it looks as if I can class everything as listed. Am I correct ?

Many Thanks
RO

--------------------------------------------------------------------------------

From HMRC

Unlisted shares are shares in a private company. They are not listed on a recognised stock exchange and they aren't offered to the general public. Many family businesses are private companies.

[someuwin] 09/1/2013 15:09

...Go back online and check that your balance is zero what I'd do.