Capital Gearing Share Discussion Threads

[gengulphus] 07/2/2014 14:36

bed and breakfast

eg day 1 sell 10k
day 2 sell 10k
day 3 sell 10k

day 10 buy back 10k
Is this matched to day 1, day 3 or something else

Day 1. That's because with one exception, you always deal with sales in date order when doing CGT calculations.

The exception is same-day sales. The same-day rules say that all processing of same-day trades gets done before any matching up of trades on different days to each other. That processing of same-day trades consists of:

* Merging same-day buys if there is more than one.

* Merging same-day sells if there is more than one.

* If after that merging, there is a buy on the same day as a sell, 'match' them to each other: if one is for more shares than the other, split it into a part that matches the smaller one on number of shares and a 'remainder' part. Then calculate a gain or loss from the now-matching buy and sell, removing them from the list of transactions to be processed and only leaving the 'remainder' part (if it exists - it won't if the original buy and sell were for the same number of shares) on that list.

So if there were a 10k sell on day 10, it would grab the 10k buy on day 10 before the 10k sell on day 1 can take it. But otherwise, the day 1 sell gets to 'match' it.

Gengulphus

[david77] 07/2/2014 11:56

EDIT: If you use the Stonebanks calculator, a buy will be matched to the first sell within 30 days, which gets marked as completed.

I'm not saying that the Stonebanks calculator is right - I'm just saying that that is what it would do.

[sailing john] 07/2/2014 11:47

Quick question - looked on HMRC quick guides and can't find an answer but I know I will get one here

bed and breakfast

eg day 1 sell 10k
day 2 sell 10k
day 3 sell 10k

day 10 buy back 10k
Is this matched to day 1, day 3 or something else

Thanks in advance

SJ

[david77] 07/2/2014 11:25

1: change the company name to FAM on your data list, with note "Formerly CEN"

2: change the qty to 1/20 of original holding, and change unit price to 20 x price that you paid, with note "As result of 20:1 consolidation" - leaving total paid unchanged

That's what you would have to do for the Stonebanks calculator. I don't know whether CGTcalculator can cope without that manual amendment to source data.

[red nutter] 07/2/2014 09:19

Hi,

Hope someone can help.

I am using hxxp://www.cgtcalculator.com/ and have a query as to how you deal with a name change and share consol at the same time.

E.G.:-

29/11/13 CEN changed name to FAM and my shares had a 20:1 consol - reducing my shares from 25,000 to 2,500

Thanks in advance

rednutter

[gengulphus] 05/2/2014 16:21

SloopJohn,

Sorry, can't be of much help in terms of answers I know to be true - taxation of returning expats goes beyond my knowledge. About the only thing I really know is that you have to be outside the country for 5 full tax years to escape CGT on your transactions while abroad, but if you've been outside the country for in excess of 5 years now and are not returning until the start of the 2014/2015 tax year, you will certainly have been away for the full tax years 2009/2010 through to 2013/2014, both ends inclusive, and so will qualify. Don't be tempted to return before April 6th, though! - unless of course you left before April 6th, 2008 and so also have the full 2008/2009 tax year.

The "CG25000c" and "CG26500+" links in and all the manual pages they link through to look relevant and might answer your question with detailed study - but I'm afraid you'll have to do that study, as there's a lot more material there than I am willing to take on at the moment! (And to be honest, probably at any time - I mostly study CGT stuff when it is relevant or looks likely to become relevant to me, and I have no plans to emigrate.)

The very small amount of skimming I've done doesn't say anything about special rules to determine what gains and losses are realised when while abroad - it generally just assumes that there are realised gains and losses and looks at whether they are taxable by CGT or not. So my first guess would be that one is supposed to work out the gains and losses that have been realised completely normally, producing the base costs for the assets not sold in the process as usual, and then decide on the basis of their dates whether they are taxable or not. The answer to the last part will presumably be "not taxable", but the base costs of the remaining holdings will be needed for future disposals.

I emphasise though that that's guesswork based on a very quick skim - I may well have missed something important.

I would prefer not to present all the transactions information from day dot to date to justify the declared price of my holdings on arrival. I thought a statement of the of the arrogate position of each share on arrival to UK, supported by purchase dates, average purchase prices for each transaction within each that share holding would suffice.

I understand that preference - but if my guesswork above is correct (quite a big if), it may not be a preference you can actually have, as the correct base cost for a remaining holding can depend in quite a complex way on the history of the holding. It's not necessarily complex - in particular, if you've only ever bought shares in a company and never sold, it will just be the aggregate number of shares bought for the aggregate costs paid for them - but it certainly can be complex, especially if tricky corporate actions have been involved such as the current Vodafone one.

One simplification that does apply is that if you sell a shareholding down to zero and don't buy again until at least 31 days later, leaving a gap of 30 or more days in which you neither held nor traded the shares, then the holding history before that gap does not affect realised gains, realised losses or base costs after the gap. I.e. assuming realised gains and losses before the gap are not relevant because none of them are taxable, you can ignore the holding history before the gap and just work from the holding history after it. Since you still have well over 30 days in the current tax year before you return next tax year, that does give you a way of escaping UK CGT calculations on holdings whose history is too complex - just sell all your shares of that type before you become taxable by CGT again and don't buy them again until at least 31 days later. That does have some drawbacks though: the chance of missing out on significant gains made by the shares while you're out of them, the trading costs, the possibility that it will realise and miss out on losses that could instead have been kept until they are usefully realisable, and the possibility that it might trigger CGT or other taxes in the country in which you are currently resident.

Once again - all of that is about stuff that might be possible if my guesswork is correct about how realised gains and losses and base costs of remaining holdings are calculated when you're abroad.

Gengulphus

[sloopjohn] 05/2/2014 12:02

What is the best way to present share holdings as a UK Tax returnee considering future CGT?

Firstly let me out line my situation.

I am English and have been an expat outside the EU for in excess of 5 years continuously, hence no CGT due in UK until I become UK tax resident.

UK tax on UK dividends been paid where due although the UK tax office advised me not to submit holdings for CGT consideration on UK shares when I became non-CGT liable.

I expect to become UK tax resident at the beginning of 2014/15 tax year. I want to ensure the start point for my holdings are documented correctly & avoid having to justify any CGT losses or defend any non-taxable gains introduced by challenges from HMG. Which, no doubt, would be to my cost.

I recognise I cannot carry forward any losses from years when I was not UK CGT taxable, also I am aware of the '30 day rule' & mindful that purchases/sales in the 30 days prior to my arrival/start of the tax year could affect the '104 holding' calculation.

So to the questions:-

How should I calculate the holding "price" of each shares at the point at which I become UK taxable? Is it as 'simple' as a "section 104 holding"?

If this is correct I assume that shares that are currently underwater are calculated in the same manner. Am I correct?

What would be an acceptable way to present this data to HMG tax?

I would prefer not to present all the transactions information from day dot to date to justify the declared price of my holdings on arrival. I thought a statement of the of the arrogate position of each share on arrival to UK, supported by purchase dates, average purchase prices for each transaction within each that share holding would suffice. Any insights, comments, advice would be most welcome.

Being aware of the '30 day rule' I would ensure buy/sells were not in the 30 day window to protect gains taken outside of my UK tax residency start.

When and using what medium should I present the data, at the point my return to the UK April 2014, in my final expat tax return Oct 2014 or maybe both?

Are there any other tax related issues/rules that spring to mind that I should be aware of prior to UK return?


Kind regards,

Sloop John B

[gengulphus] 31/1/2014 12:29

If you gift shares husband to wife or the other way around this obviously has to be done PRIOR to selling. Correct?

Hmm... Obviously they're no longer yours at all after the sale settles, and you cannot give away something you don't own.

But I cannot see any reason in principle why you couldn't sell the shares, then transfer them between husband and wife before the sale settles - it's not very different in principle from the technique used by some short-term traders (and allowed by some brokers) of selling shares on long settlement, then buying on short settlement to cover the sale. I believe it works fine as long as one makes certain the buy settles first and then the sell.

So I don't see anything wrong in principle about say the wife selling and the husband then making a gift of the shares to be sold to the wife, as long as the gift transfer gets on to the share register before the sell settles. But note that does not mean your broker has to allow it: many brokers basically say in their terms & conditions (and enforce with their trading systems) requirements that you cannot sell or transfer shares they've not got on your account records, and that buys, sells and transfers take immediate effect on those account records - which would make it impossible.

Doing it the other way around (supposing again that the broker allows it at all), so that the wife sells and then makes a gift of the shares sold to the husband before the sale settles, has two main possible results. If she still has enough shares of the right type on her account to settle the sale, those get used to settle it - shares of a given type are basically indistinguishable from each other, so all the sale commits her to is settling with the right number of shares, not with a particular collection of shares.

The other possible result happens if she has no shares or not enough shares on her account to settle the sale when the time to settle it arrives. In that case, she has broken a contractual commitment and can be sued... Though normally, brokers' terms and conditions contain stuff to allow them to deal with that situation more cheaply than by resorting to the law - typically by buying the shares needed to settle the sale at her expense and without specific instructions from her, and if necessary similarly selling other shares on her account to raise the cash to do that buying... It's typically only if that's not possible (e.g. if the account has been emptied of cash and other shares) that they'll actually resort to the law. They're also liable to insist on closing the account - not honouring contractual commitments is a serious matter that no broker wants its clients to do.

They may well give the client an opportunity to fix things before taking those steps, to allow for simple human error. But it probably won't be a very long opportunity - such matters should be dealt with urgently by any investor who wants to avoid undesired trades, closed accounts and lawsuits.

Gengulphus

[here and there] 30/1/2014 22:38

thanks for your kind reply

[liquid millionaire] 30/1/2014 20:53

If you gift shares husband to wife or the other way around this obviously has to be done PRIOR to selling. Correct?

[3damo] 30/1/2014 19:54

CGT 2013/2914
Sir,
Thank you for your full & detailed reply.You clearly described in your last but one paragraph the answer I was looking for. I was not precise enough in my request & apologise for the confusion.
Much appreciated.
3damo

[gengulphus] 29/1/2014 17:25

here and there,

1/. i made capital gains losses in previous years. can i put them against gains in this year/future years?

Maybe - it depends on whether you're in time to claim the losses, and if you are, whether they have actually survived through to this year without being used against capital gains in the year they were realised or any of the intervening years.

For (a lot) more detail, see my earlier posts 525 and 587 on this board.

2/. holding aim shares for 3 years. does this exempt me from cgt?

No, not in general.

There is something called the Enterprise Investment Scheme (or EIS for short), that some shares are issued under (and some of those shares are traded on AIM). If you subscribe to newly-issued EIS shares, you might be eligible for some tax reliefs, one of which is that they become exempt from CGT after three years of holding - "might be" rather than "are" because there are a number of conditions to be met.

But most AIM shares are not EIS shares - and even when they are EIS shares, shares bought on the market don't qualify, only newly-issued shares bought directly from the company with a cash subscription to one of its fundraisings.

Gengulphus

[riggerdigger] 29/1/2014 12:52

Thanks Gengulphus.

[here and there] 29/1/2014 12:00

two questions,

1/. i made capital gains losses in previous years. can i put them against gains in this year/future years?

2/. holding aim shares for 3 years. does this exempt me from cgt?

[gengulphus] 29/1/2014 09:12

No, account fees cannot be claimed as allowable costs for CGT purposes. Incidental costs of purchase and sale are allowable, but such costs have to be specifically associated with a particular purchase or sale. So things like stamp duty, broker commission and PTM levy are allowable for the CGT computations on the purchase or sale that generated them - but things like account fees that help to pay for all trades on the account rather than for any specific one of them aren't allowable costs for any of them.

Gengulphus

[riggerdigger] 28/1/2014 16:18

Does anyone know if account admin fees for non ISA trading accounts can be claimed back?

[gengulphus] 28/1/2014 15:08

I understand a joint account ISA has capital gains exemption amount of £21,800.
Is this doubling up also applicable with "disposal of chargeable assets" ie. shares with a value of £43,600 to become £87,200?

I'm afraid you don't understand correctly.

For a start, there is no such thing as a "joint account ISA". The term "ISA" has its origins as an abbreviation for "Individual Savings Account", and the "Individual" part of that is about the fact that an ISA can only have a single owner, who must be a specific individual human being - they cannot be held by companies, trusts, partnerships, etc.

It may be that you're talking about a situation in which two people (typically a married couple) each hold an ISA with the same provider, both of those ISAs being run by the same one of them (or by the two of them together). If so, the management of those ISAs is effectively joint - but the legal and tax situation is that they are two separate ISAs. Each of those two ISAs is completely owned by one of the two and not at all by the other.

And the good news if that's what you're talking about is that like all other ISAs, each of the two ISAs is completely exempt from Income Tax and CGT (though unfortunately not other taxes, such as stamp duty on purchases and the 20% 'flat rate charge' on interest earnt on cash held in equity ISAs). Because of that exemption from CGT, the ISAs don't either have or need CGT allowances - or looked at another way, in effect their CGT allowances are infinite, as they can realise any amount of capital gains without having to pay CGT.

The other possibility that springs to mind is that you didn't mean "joint account ISA", but just a "joint dealing account". In that case, what you say is still not a correct understanding, because accounts don't have CGT allowances - instead, each individual taxpayer has a CGT allowance.

However, if you're talking about a situation where two people have a joint dealing account and don't dispose of any other assets subject to CGT, what you say is effectively correct. The reason is that each of them is regarded for CGT purposes as being responsible for 50% of each transaction that happens in the joint dealing account. So e.g. a sale that produces £87.2k disposal proceeds and realises a capital gain of £21.8k is treated as having produced £43.6k disposal proceeds and realised a capital gain of £10.9k for each of the two people. And so each of the two people is just within the limits under which they don't have to report their capital gains and losses - provided they have no other disposals of assets subject to CGT!

But once it gets more complicated than that, things change. E.g. if three people have a joint dealing account and don't dispose of any other assets subject to CGT, then similar statements about the amounts of disposal proceeds and gains being tripled are effectively correct. Or if two people have a joint dealing account and one of them also has a solely-held dealing account, and neither of them disposes of any other assets subject to CGT, then the one who does have the solely-held account has to check the total of all of the amounts for the solely-held account and half the amounts for the joint account, while the other only has to check half the amounts for the joint account.

Gengulphus

[3damo] 27/1/2014 16:38

CG tax 2013/2014
Sir could you kindly assist?
I understand a joint account ISA has capital gains exemption amount of £21,800.
Is this doubling up also applicable with "disposal of chargeable assets" ie. shares with a value of £43,600 to become £87,200?

[smurfy2001] 26/1/2014 13:32

I've had a look at Zoopla to see how much a property was sold to me for. It's been many years since I've had this property and l can't find it.

So does anyone know who l could use to find this out.

The only thing l can think of is to contact the land registry, would should have the amount is was sold to me for.

[bohemian13] 25/1/2014 20:54

Thanks Gengulphus, your help is appreciated.

[nestoframpers] 25/1/2014 20:08

Gengulphus thanks for your answer , they were GKP shares , I had made a good profit on them , will send it in quick and hope I don't get stung , cheers very much .

[gengulphus] 23/1/2014 07:50

bohemian13,

Quick question - Are dividends from jersey based companies taxed in same way as UK based companies ?

Quick answer: Strictly speaking, no - assuming you're talking about a purely-UK-based taxpayer, they're taxed by the combination of Jersey tax law and UK tax law, rather than by UK tax law alone.

Less strictly speaking, it may well be that the combination of Jersey tax law and UK tax law produces the same outcome as UK tax law alone would have done. If so, you would probably regard the answer as being "yes" for practical purposes. But I'm afraid my knowledge of tax law pretty much stops at the borders of the UK - about all I can do is point you at the Foreign supplementary pages of the tax return ( ) and their accompanying notes ( ), and add that searching the latter for "Jersey" does indicate that a number of special rules apply to it...

The other thing I would suggest is trying the general TAX thread - this thread is specific to CGT and so you might stand a better chance of finding someone knowledgeable about foreign income tax issues there.

Gengulphus

[gengulphus] 23/1/2014 07:31

nestoframpers,

I sold £11000 worth of AIM shares to buy in a ISA do I have to pay CGT on that sale ?

Sorry, too little information to be able to tell.

First off, you don't actually say whether the shares you sold were in an ISA (or other tax shelter) before you sold them - that information is needed to answer the question, because if they were in a tax shelter, they'll be exempt from CGT. Otherwise they're probably subject to CGT.

My guess is that you mean that you sold the AIM shares outside the ISA in order to subscribe the money to the ISA and repurchase the same type of AIM share inside. If so, the sale is probably subject to CGT - but that answer does depend on my guesswork about what you meant, not what you actually said!

Secondly, there might conceivably be some special features of the shares that make them exempt from CGT even outside a tax shelter, which is why I only say "probably subject to CGT" rather than "subject to CGT". If there aren't any such features, then the sale outside the ISA is subject to CGT. The fact (assuming it is a fact!) that you intended to subscribe the sale proceeds to an ISA and buy shares inside it is not such a feature, regardless of whether the shares bought are the same type of shares.

Thirdly, the sale being subject to CGT does not necessarily mean you will have to pay CGT on it. You won't have to pay CGT on it if either of the following is the case:

* you didn't realise a gain on the sale (the fact that it produced £11k doesn't tell me anything about the gain or loss you realised other than that if it was a gain, it was no more than £11k);

* you realised a gain on the sale but that gain is covered by your CGT allowance and/or losses you've realised on other sales.

There are probably a number of other circumstances that could result in a realised gain that is subject to CGT not actually causing CGT to have to be paid, e.g. ones caused by CGT reliefs that apply in special circumstances. But those two are the main ones.

Gengulphus

[bohemian13] 22/1/2014 14:42

Quick question - Are dividends from jersey based companies taxed in same way as UK based companies ? Thanks