Capital Gearing Share Discussion Threads

[miata] 08/11/2013 20:47

The aspect/problem you should investigate is:
"You must make your nomination within two years of the date from which you change the number of properties you live in. You should make a new nomination whenever the number of homes you live in changes."

Obviously your other house becomes eventually potentially taxable for a small percentage of its capital gain (this period/total) unless you sell it within three years.

It may be seen as artificial, but the requirements of the law are specific and it has been successfully applied by many (including MPs).

You can and should Google for more evidence/confirmation.


TCGA92/222(5) "a dwelling house must be in use as a residence of that individual before it can be validly nominated."
CG64427+
CG64470
CG64485

[renew] 08/11/2013 17:27

Thanks Miata
If I moved in to it for a few months would there be a problem if I then moved out back to my existing main residence. Would this be seen as artificial tax move?
Also if I moved into the property for a short time and then relet it for 6 months would I be eligible for the £40000 offset against CGT. As the property has already been let would I be eligible for the £40000 even if I did not relet it after living in it?

[miata] 06/11/2013 10:05

First aspect - what is the potential capital gain?

If the gain is large (>£50k say) I would suggest you move into it (doesn't need to be a year even a few weeks as your main residence should suffice).

"The final 36 months of your period of ownership always qualify for relief,
regardless of how you use the property in that time, as long as the dwelling
house has been your only or main residence at some point."

[renew] 06/11/2013 09:58

Any advise welcome.
I have a flat registered in my name bought in the late 90's which Ive never lived in but spent a lot of time,effort and money doing up.Flat has been let out for last 10 years and has appreciated considerably in value. I've now become fed up with the tenant hassle and am considering selling.Obvious problem is the potential large CGT bill. I can obviously add my wife to the owners at land registry and could if there were a large saving move into it for a year.
If there's anyone who's had a similar problem or has knowledge of the most tax efficient way of selling the property I would be grateful to receive their advice.
I do not understand the 'property flipping' tactics used by some. Would their be any advantage using flipping in this instance?

[riggerdigger] 05/11/2013 22:29

Thanks for the answer Miata, less than 30 transactions.

[miata] 05/11/2013 22:18

Depends on your needs. For say 30 transactions or less you are unlikely to need any software and can complete online. For more seek out free CGT calculator programs on the web. If you trade daily you may find commercial software useful.

[riggerdigger] 05/11/2013 21:50

Filling my own form this year, last two years used an accountant. Can anyone advise me if it is better to use a tax forms supplied by HMRC or best to buy software advertised on their site. Wondering what everyone does.

[gengulphus] 22/10/2013 09:05

sailing john,

It's whatever your allowable costs would be if you'd instead sold the shares, so that the calculation of your gain/loss comes out as (your allowable costs) - (your allowable costs) = 0, i.e. neither a gain nor a loss.

Normally, yes, that would be the costs of the appropriate shares from your Section 104 pool, but if you have some costs specifically associated with transferring the shares to your spouse - e.g. your broker charging you a fee to do the transfer - then they're also part of your allowable costs, the same way that selling commission is on a normal sale.

And if you acquire the same type of shares on the same day as or within 30 days after the transfer, then the same-day or 30-day rules take priority over taking the shares out of the Section 104 pool and so change the allowable costs for those shares, just as they do for any other disposal. But unlike for a normal disposal, that has a knock-on effect on what your disposal proceeds are deemed to be.

Basically, the calculations for a transfer to your spouse are entirely the same as for a normal disposal except for that step of deeming the disposal proceeds to be the same as your allowable costs, and your spouse's acquisition costs to be the same amount, just as though your spouse had actually paid you that amount (*). And for completeness, if the broker charges your spouse a fee for the transfer, that immediately gets added on as incidental costs of acquisition, similar to a buying commission.

(*) And the same happens if your spouse actually does pay you for the shares - the amount actually paid is ignored and you're both treated as though your allowable costs were paid.

Gengulphus

[sailing john] 22/10/2013 08:39

Transfer of shares to Spouse - just checking

When I am transferring shares that are part of a pool after a series of buys/sells at various prices is the value to my Spouse recorded as the pool price on the day of transfer?

[boozey] 22/10/2013 04:40

I agree Miata, and thanks
Poorly worded article to say the least.

[miata] 21/10/2013 22:21

I can only assume that all refers to "under the Enterprise Investment
Scheme".


The Enterprise Investment Scheme (EIS) offers tax incentives if you invest in shares in smaller, unlisted companies. The scheme provides the following Capital Gains Tax reliefs:
- Capital Gains Tax Deferral Relief, when you reinvest a gain on an asset in shares under EIS
- exemption from Capital Gains Tax when you sell or dispose of the shares

Capital Gains Tax exemption
You won't have to pay Capital Gains Tax when you sell or dispose of shares if all the following conditions apply:
- you've received Income Tax relief on your shares under EIS
- the Income Tax relief has not since been recovered
- you have held your shares for at least three years

[miata] 21/10/2013 21:24

No, I decided I didn't want to be contacted. As its a pdf you could (temporarily) copy it here (I had thought you'd received it in paper form).

[boozey] 21/10/2013 21:08

Yes that is the one Miata.... did you see the bit about exemption of CGT on AIM shares help over 3 years? Thoughts?

[boozey] 21/10/2013 16:37

It was a pdf they sent me under the title ''Top 5 AIM Stocks for 2014''
Knowing how that company is prone to gilding the lilly I can well believe that put an enticing but misleading statement into one of they flyers. They need to manage their governance better. However it is correct then good for them for pointing it out.

[miata] 21/10/2013 16:29

I think you are right its wrong.

I'd like to see the piece and its context as there are many schemes eg VCT, EIS, SEIS (seed enterprise investment scheme) that have tax exemptions but if does not relate to such a scheme you should email him about it.

Do you have a link eg

[boozey] 21/10/2013 15:53

I have been sent a AIM Market view by Galvan. On page 3 it states that if an AIM stock has been held for 3 years it is exempt from CGT...is this right? I thought it had to be held in a EIS to qualify from this? Does anyone know the factual answer to this please? If it is true that individual stocks are exempt from CGT after 3 years this is very good news, but I am not convinced the article is right. Thanks for thoughts in advance

[pshevlin] 21/10/2013 10:02

Sorry, forgot to say thank you Gengulphus for your extremely detailed answer which I will copy and keep to hand.Really very good of you and will probably help an awful lot of people.

[pshevlin] 21/10/2013 09:56

Due to the number of trades the my disposal proceeds EASILY exceed 4x the GGT allowance. Dont worry, I've already worked that one out. (Just wish the profits were 4x CGT!)

[gengulphus] 21/10/2013 06:11

I'm having to report my share dealings for the first time due to frequency of trading ( not gains for 2012-2013 unfortunately!) and having approximately 100 trades in that period ...

There is no 'frequency of trading' reason for having to report your capital gains and losses! The main reasons for having to do so are:

A) Having gains before deduction of losses that exceed the CGT allowance.

B) Having total disposal proceeds that exceed 4 times the CGT allowance. Disposal proceeds mean the total amount the shares (and any other non-exempt assets) were sold for before deducting any costs (in particular, before deducting the selling commission).

C) Wanting to make any CGT election or claim (which includes wanting to claim losses).

There are also two other reasons to do with foreign domicile that I don't remember offhand - the full list can be found in the notes about the main tax return.

Of course, with about a hundred trades, it's quite likely at least one of those three reasons applies. But not certain - as a simple example, someone using one of the brokers' cheap monthly purchase schemes and splitting their purchases between 8 shares each month would have 96 trades in the year, all buys, and so not have any gains, losses or disposal proceeds...

But a more typical split of about half the trades being buys and the other half sells would mean that the disposal proceeds per sell would have to be under about £900 for reason B not to apply. Moreover, even though you didn't make enough net gains to have to pay CGT, it's quite likely that your total gains on the profitable sells are over the CGT allowance and it's only deducting the losses on the loss-making sells that brings your net gains below the allowance, which means that reasons A and C both also apply.

... wondering in what form I have to show my workings. ...

Basically, there is no prescribed form. Any form will do that clearly tells the taxman what buys and sells you've made (and if relevant, other acquisitions and disposals, such as gifts of shares) and how you've calculated the gains and losses from them.

The taxman's instructions for the capital gains pages ( ) do include a "working sheet" on page 21, but as the instructions themselves note, it only caters for the most straightforward cases - for instance, it doesn't handle cases where the shares sold come from more than one buy. At one gain or loss per A4 page, it's also quite voluminous... It is however a reasonable guide to how much detail the taxman wants about the buys and sells.

... My questions are, should anyone be kind enough to answer them:

1. Is it enough to give the working out from my online CGT calculator or do I have to fill in a separate form for each transaction? ( I use the CGT Calculator online not Stonewall)?

It's very difficult to say with 100% certainty that any particular form of CGT workings is acceptable to the taxman. Basically, it's pretty certain he never bothers to look at most submitted workings at all, but only looks at a random sample of them plus those on any tax return he regards as suspect for some reason. It simply wouldn't be cost-effective use of his time to try to check everything.

However, quite a few people on this board have reported using the output of the calculators, and no-one has reported being told by the taxman that it's not adequate. So it seems highly likely to me that the output of the calculators is adequate - I just cannot be 100% certain.

I should add that I am certain the output of the calculators is at least an honest attempt to supply the taxman with the details wanted - so if he does look at it and decide he wants some detail that isn't there, the worst that is likely to happen is him asking for that extra detail.

2: Is it possible to do this and submit online or would I have to send the workings separately?

I don't have experience of doing that (I use spreadsheets of my own design myself (*)), but you should be able to print their output to a PDF in one way or another and attach the PDF to your online tax return. I'll leave those who do have such experience to say what they think the best way to print to the PDF is.

(*) That's partly because I started doing CGT before the calculators were available and so have all my data in the spreadsheets, and partly because I know how to deal with corporate actions properly on the spreadsheet. The calculators are very limited about which corporate actions they can deal with straightforwardly. They can deal with more corporate actions by the user making the right adjustments to the inputs - but I'm fairly certain there are at least a few cases that cannot be handled correctly that way and (probably more importantly) some cases where it is harder to work out the correct adjustments to the inputs than it is to do the relevant computation by hand...

3 I have smaller losses and gains from previous years, would it be useful to send these as well ( maybe separately a little later due to time pressure )?

Possibly - you might have losses in the previous tax years that can be claimed and brought forward through to the 2012/2013 tax year. But it's not as simple a matter as just saying "look, I have this loss back then".

Firstly, you've got to be allowed to use the loss. That's only allowed if you claim the loss within the allowed time limit (which is four years after the end of the tax year in which the loss was made) or it's a loss made before the need to claim losses was introduced. That currently means that the loss needs to be one made in the 2009/2010 tax year or later, or in the 1995/1996 tax year or before. Losses made in the tax years 1996/1997 through to 2008/2009 are unusable unless you have already claimed them - but as having claimed them just means having sent them to the taxman and you're asking about sending them to the taxman, I presume you haven't!

Secondly, the loss has to have been allowed to be carried forward out of the tax year in which it was made. It's got to be used against gains made in that tax year if possible, and that gets done before using your CGT allowance. So if e.g. you made £3k gains and £2k losses in a tax year, you've got to use all the losses against those gains, leaving no losses to carry forward - you cannot say "the CGT allowance covers my gains, and I'll carry the £2k losses forward". And if instead you made £2k gains and £3k losses in a tax year, you have to use £2k of the losses against the gains and only carry £1k losses forward.

Thirdly, losses only get carried forward one year at a time, so the loss has to have got through all the intervening tax years to 2012/2013. This should be automatic for tax years in which you didn't have to fill in the capital gains pages and submit your workings, because unlike same-year losses, brought-forward losses only have to be used to take gains down to the CGT allowance, not all the way down to zero. Not having had to fill in the capital gains pages and submit your workings before implies that your gains were no more than the CGT allowance even before deducting same-year losses, so that brought-forward losses were just carried forward again. But if by any chance a mistake was made about whether the capital gains pages had to be filled in, things might be different.

The likely result of those three points is that it's only worth looking at the three tax years 2009/2010, 2010/2011 and 2011/2012, and only worth sending details of the gains and losses for any of those tax years that had more losses than gains, in order to claim the net losses left after using the losses to wipe out the gains.

I have one further question which is, If I have made a repurchase of shares within the 30 day b&b period after the end of the last tax year do I have to include it on that years form or can I leave it until the 2013-2014 declaration?

Yes, you are supposed to take such repurchases into account. Basically, you have to match sales to purchases correctly under the various share identification rules and then report the gains and losses made (or "realised" in taxspeak) in the tax year. The date a gain or loss is realised is always the date of the sale, so when the 30-day rule matches a sell near the end of one tax year to a buy near the start of the next tax year, it needs to be reported for the sell's tax year.

You might even need to take some sales in the following tax year into account. Specifically, while most of the share identification rules are processed in date order, the same-day rules are processed for all dates before any of the other rules are processed for any date. So if you have sell S1 near the end of a tax year, buy B near the start of the next tax year and within 30 days after sell S1, and sell S2 on the same day as buy B, then matching sell S2 to buy B takes precedence over matching sell S1 to buy B, and so you need to tell the calculator about sell S2 to make certain it gets the right answer.

Probably the simplest way to make certain you've got the gains and losses right for a tax year is to give the CGT calculator all buys and sells up to 30 days after the end of the tax year (i.e. up to and including May 5th) and then eliminate gains and losses reported as being realised in those 30 days from the output.

Gengulphus

[david77] 20/10/2013 17:27

"and having approximately 100 trades in that period"

The Stonebanks calculator needs less data entry than CGTcalculator.com and I think that the results are easier to follow.

You should be able to create a data text file using Wordpad in little more than an hour. I have a text file for each tax year - I don't do much short term trading so don't worry about the 30-day rule over the end of a tax year. At the end of a tax year, the prog will produce starting data for the following year.

Company - starting with a letter followed by a list of deals
date, b or s, qty, price(pence), consideration - what you paid or recvd

Deals don't need to be in date order - the prog will sort them.

I always add the deal figs to my data file before filing a contract note.

[fireplace22] 20/10/2013 16:48

Where is this 'number of trades' condition coming from? My understanding is that declaration is required depending on the consideration received, whether the person wishes disclose losses for future use or if gains are in excess of the annual allowance. Number of trades is immaterial surely?

[pshevlin] 20/10/2013 15:11

Crontab thanks. I'm with TDW and they dont seem to provide a detailed analsis like that with all the necessary figures. If someone knows better please tell.