Capital Gearing Share Discussion Threads

[gengulphus] 24/1/2020 13:29

eeza,

My understanding is that CGT totally ignores CGT-exempt assets, so I think your total sales should only count the CGT-chargeable gold coins.

I don't know exactly what "registered for Self Assessment" means or how long such registration lasts for, but my understanding of your obligations is based on It is that:

* if HMRC ask you to fill in and submit a tax return for a tax year, you're obliged to do so and to follow its instructions in doing so - those instructions include having to fill in the capital gains part if the total for which you have sold (non-CGT-exempt, I believe) assets is over four times the allowance;

* if HMRC don't ask you to fill in and submit a tax return for a tax year, you're obliged to work out whether you have Income Tax to pay in excess of what has already been deducted at source, and whether you have CGT to pay, and to notify HMRC if you have either (and I would expect HMRC to often respond to receiving such a notification by asking the taxpayer to fill in and submit a tax return, changing it into the first situation). As far as I am aware, this obligation does not involve a check on the value of the assets you have disposed of, only on the gains you have made (*).

So on the assumption that HMRC haven't asked you to fill in and submit a tax return, it doesn't sound to me as though you need to do anything about CGT. And even if they have asked you to fill in and submit a tax return, or if they do so in the future, it doesn't sound to me as though you need to say anything about CGT in it.

Just to be clear, though, I'm not a tax professional or expert - I'm an informed layman on CGT with most of my experience of CGT being for shares. I have no experience of CGT on coins, etc. So I am a bit out of my depth here, and my understanding is based only on general principles - it could easily be wrong if (for example) there's a special rule somewhere that I haven't encountered...

(*) Note that if your overall gains are made up of a mixture of individual gains and losses, you can only offset the losses against the gains if you have 'claimed' the losses - i.e. told HMRC about them, with details. This could just conceivably be an issue for your chargeable sales - e.g. if you bought two coins for £2.5k and £17k, and sold them for £15k and £5k respectively, you would have sold for £20k and made an overall gain of £500, but it would be made up of an individual gain of £12.5k and an individual loss of £12k, and you would have to let HMRC know about at least one of the loss (to 'claim' it) and the gain (if you left the loss 'unclaimed'). I don't think that sort of situation is at all likely with gold coins, as in your case, but it can easily happen with other types of asset such as shares - so I'm writing this footnote mainly as a warning to other readers!

Gengulphus

[eeza] 23/1/2020 23:30

Gengulphus
Could you offer your opinion, please.
From HMRC - Capital Gains Tax - Work out if you need to pay

If your total gains are less than the tax-free allowance
You do not have to pay tax if your total taxable gains are under your Capital Gains Tax allowance.

You still need to report your gains in your tax return if both of the following apply:
1) the total amount you sold the assets for was more than 4 times your allowance
2) you’re registered for Self Assessment

Tax year 2019-2020 - Allowance £ 12,000
I have sold a quantity of gold coins, mostly Gold Sovereigns & Britannias - CGT exempt.

Total Sales Exempt Sales Chargeable Sales
£ 90,000 ....£ 70,000 ........£ 20,000
Total Gains Exempt gains Chargeable Gains
£ 5,000 ......£ 4,500 ..........£ 500

So my gains are less than my CGT allowance. The next test states BOTH 1 & 2 need to apply.

Q: Does #1 - 'the total amount you sold the assets for' refer to the chargeable assets sold (that gave rise to the capital gains) or to the total assets sold (Exempt + chargeable)?
Q; Does #2 mean I am registered for SA and need to make a return this year - or refer to being registered for SA at some time in the past?

I was registered for SA in the past but have not had to make a SA return for the last 2 years as only have OAP + tiny private pension.

[apollocreed1] 08/1/2020 18:00

@psync - They are positioned in the expectation of a crash. The problem with timing the market in this way is that you can be wrong for a long time and miss out on the rising market. e.g Terry Smith at Fundsmith would not agree with this strategy.

[psync] 07/1/2020 15:07

It's an interesting portfolio with 35% equities, 60% fixed income and 5% cash/gold. Obviously performs well compared to global aggregate bond indices due to equity exposure but I wanted to see how it compared to a similar composition LifeStrategy fund:

5 Yr Return Annualised:
6.4% - Capital Gearing Trust (November 2019)
5.8% - Vanguard LifeStrategy 20% Equity (September 2019)
7.3% - Vanguard LifeStrategy 40% Equity (September 2019)

I guess the advantage here is that management can change allocations to benefit returns, and LifeStrategy fund data only goes back to 2011 so don't know how it would have performed relatively during the financial crisis.

[apollocreed1] 01/1/2020 12:41

But I think the CG Absolute Return Income fund that they run (the open ended unit trust) might be a better way to get in. There's no spread or premium to pay and I think the portfolios are virtually the same.

[escapetohome] 31/12/2019 23:42

I would not argue with that . SOUND.

[apollocreed1] 31/12/2019 21:13

Time to move some money into this fund I think. US markets are looking very expensive, although I still like the FTSE 250.

[attrader] 09/9/2019 19:32

Once again thanks Gengulphus. Really thorough reply and made it really clear.

[finkwot] 01/9/2019 21:12

If you go to the information desk in the Business & IP Centre they'll show you how to search their database. You can open the reports to read on their desktop computers, but if you want copies you have to go back to the desk and they download and email them to you. Unfortunately they limit it to ten per day - I don't know if there's any flexibility about that.

(If you don't have a reader's card, it's easy to get one but you do have to apply in advance online and take some ID in with you when you go to collect it. They ask why you want a card but I had the impression that any reason would be accepted.)

[zangdook] 31/8/2019 17:29

(wrong board)

[gengulphus] 31/8/2019 16:03

finkwot,

Incidentally, with reference to my earlier enquiry and your reply in post 1100, after trying several places I found the Business & IP Centre at the British Library the most helpful for finding old company reports. They don't have a complete collection but they have quite a few in scanned form which they cheerfully give out.

Thank you! Not a place I would have thought of looking, and a source of scanned old company reports would be most helpful for allowing me to reduce my substantial pile of paper copies of old company reports without any fear of throwing any information I might find useful (or even just interesting) in the future. And as it happens, I'm probably moving house in the reasonably near future, so making it easier for me to dispose of old papers is very useful at present - especially bulky ones like company reports!

Gengulphus

[gengulphus] 31/8/2019 15:54

robo21,

Retired gent opens crypto trading account makes profit 100k
19-20 tax year. What would his capital gain liability be ?

Sorry, insufficient information there to determine what the answer is. Further information needed includes at least:

* just how the "profit" has been calculated - CGT works off "realised capital gains", which may be calculated differently;

* whether any taxable capital gains on other assets have been realised in the same tax year, and if so, what they are;

* whether any allowable capital losses have been realised in the same tax year, and if so, what they are;

* whether the retired gent has brought-forward losses from earlier tax years, and if so, what they are;

* whether the retired gent is a non-taxpayer, a basic-rate taxpayer or a higher-rate (or above) taxpayer as far as Income Tax is concerned, and if a basic-rate taxpayer, how much of their basic-rate band they've left unused (see my reply to attrader above).

But to give an idea, if the "profit" has been calculated in the way that "realised capital gains" should be, and there are no other realised gains or losses in the tax year, nor any brought-forward losses from earlier tax years, then:

* If the retired gent is a higher-rate (or above) taxpayer as far as Income Tax is concerned, then the first £12k (the 2019/20 CGT allowance) of the gains are free of CGT, and the remaining £88k are all charged at 20%, for a CGT bill of £17,600.

* If the retired gent is a non-taxpayer as far as Income Tax is concerned, then the first £12k (the 2019/20 CGT allowance) of the gains are free of CGT, then the next £37.5k (the 2019/20 Income Tax basic-rate band) are charged at 10%, and the remaining £50.5k are charged at 20%, for a CGT bill of £3,750 + £10,100 = £13,850.

* If the retired gent is a basic-rate taxpayer as far as Income Tax is concerned, then the answer lies somewhere between £13,850 and £17,600 - where exactly between them depending on how much of their basic-rate band was left unused in their Income Tax calculation.

Finally, all of this answer is dependent on my not having missed any relevant special rules having been introduced about CGT on cryptocurrencies - because they're a relatively new form of investment, it's rather more likely than usual that they have been!

Gengulphus

[finkwot] 31/8/2019 15:40

Gengulphus

Thank you.

The rights issues date back to the 1990s and it took me quite some time to find the details (and even now I don't have them all), so I think I shall assume that since, as you say,

the effect is just to add the enhancement expenditure to the base cost

HMRC won't mind too much if I just present it like that. As far as I can tell the rights were taken up in full.

Incidentally, with reference to my earlier enquiry and your reply in post 1100, after trying several places I found the Business & IP Centre at the British Library the most helpful for finding old company reports. They don't have a complete collection but they have quite a few in scanned form which they cheerfully give out.

[gengulphus] 31/8/2019 15:06

attrader,

I have a question about CGT tax bracket. I have a company where I receive all my income in dividends and I pay dividend tax rate. For CGT, would I be classified as Basic Rate payer or High rate payer since I don’t receive any salaried income ?

I cannot really answer that question as it stands, because nobody is really classified as either a basic-rate taxpayer or a higher-rate taxpayer for CGT purposes. Rather, their taxable capital gains are taxed by CGT at either the lower rates of CGT (10%, or 18% for residential property) or the higher rates (20%, or 28% for residential property), as follows:

1) Work out the total of their taxable capital gains realised during the year.

2) Deduct allowable capital losses according to the rules for doing so: first deduct ones realised during the same year as far as possible (i.e. deduct all those losses if they're less than the gains, or an amount equal to the gains if they're greater). Then if the remaining gains are above the CGT allowance and there are losses brought forward from earlier years, deduct them until either they run out or the gains are reduced to the CGT allowance. (Any losses left undeducted at the end of this are carried forward to the next year.)

3) The remaining gains are the net taxable capital gains. They are taxed as follows:

* First, an amount up to the CGT allowance is not taxed.

* Second, if there are gains left after the first step (i.e. the net taxable capital gains were more than the CGT allowance), an amount up to the amount of the Income Tax basic-rate band that was not used for income in the Income Tax calculation is taxed at the lower rates.

* Finally, if there are still gains left after the first two steps, they are taxed at the higher rates.

So the simple case (which I would guess doesn't apply to you) is that if you're a higher-rate taxpayer (or above) as seen by Income Tax, i.e. if your Income Tax calculation takes you into higher-rate tax, it will have used your entire basic-rate band, there will be nothing left for the second step to use, and so none of your net taxable capital gains will be taxed at the lower rates. I.e. up to the CGT allowance will be untaxed, and anything over that is taxed at the higher rates.

But if you're a basic-rate taxpayer as seen by Income Tax, i.e. if your Income Tax calculation takes you into basic-rate tax but not into higher-rate tax, you probably didn't use all of your basic-rate band in that calculation (not quite certainly because your taxable income might be exactly equal to the higher-rate threshold, taking you all the way through the basic-rate band but not quite into higher-rate tax). Up to the CGT allowance of net taxable capital gains is untaxed and up to your amount of unused basic-rate band is taxed at the lower rates, and anything not covered by those is taxed at the higher rates.

Or if you're a non-taxpayer as seen by Income Tax, i.e. if your Income Tax calculation has all of your taxable income covered by your personal allowance and any other proper Income Tax allowances you happen to have (though see below about some 'allowances' introduced in recent years) and so doesn't take you into basic-rate tax, the same applies except that all of your basic-rate band is available, not just some of it. Note that unused allowances do not count as unused basic-rate band. In particular, unused Income Tax personal allowance is completely wasted and doesn't affect the CGT calculation, just as unused CGT allowance is completely wasted and does not affect the Income Tax calculation.

So basically, it's the gains that are classified as being covered by the CGT allowance, taxed at the lower rates or taxed at the higher rates, and you could well end up having some taxed at each rate. So asking how you are classified is somewhat off-target... (*)

A couple of other things to say: first, the Income Tax calculation does of course look at all your taxable income - salary, interest and dividends (unless received in an ISA or other tax shelter), pensions, etc. So the amount of salaried income you receive is not enough on its own to determine how much basic-rate band your Income Tax calculation leaves unused - and the dividends you receive do count towards taxable income. "Dividend tax" is not a different thing from Income Tax - it is Income Tax, just paid at a lower rate than for most taxable income.

And secondly, the so-called 'dividend allowance' is not what I called a "proper Income Tax allowance" above, in that it doesn't prevent the dividend income it covers being counted against the tax bands: it is just an especially low tax rate of 0% that applies to the dividend income it covers. I.e. 'dividend allowance' is a rather poor description of it, since it's applied in a rather different way to the personal allowance and that different way does affect how the basic-rate band is used. And other "allowances" introduced in fairly recent years may need careful looking at to see whether something similar applies to them...

(*) Note that this is little different from the situation with Income Tax - higher-rate taxpayers generally have part of their income taxed at basic rate and the rest at higher rate. So it is customary to take "higher-rate taxpayer" to mean someone in that situation, and there is a convention that one describes a taxpayer according to the highest rate of Income Tax that they pay. One could have a similar convention with regard to CGT, so that one describes someone as a "higher-rate CGT payer", a "lower-rate CGT payer" or a "CGT nonpayer" according to whether they pay CGT at the higher rates (possibly accompanied by also paying it at the lower rates), and if not, whether they pay it at the lower rates. But just as what rate of Income Tax taxpayer one is normally regarded as is an output from the Income Tax calculation, not an input to it, what rate of CGT taxpayer one is by that definition is an output from the CGT calculation, not an input to it. One needs to know all the inputs to the CGT calculation to determine it, not just the facts you give!

Gengulphus

[gengulphus] 31/8/2019 11:20

finkwot,

If I buy a convertible bond which pays interest, hold it for several years and receive the interest each year, and then convert the bond to ordinary shares, is the cost of those shares the price I paid for the bond? Or is the interest deducted, in whole or in part?

I hope and suspect that the interest is treated as income, taxed in the relevant year, and has no bearing on the cost, but it's best to be sure.

Can't say I have any experience with convertible bonds, but I would assume that the situation is just the same as for any other case where an investment generates income, and then later gets reorganised in some way - e.g. if a company pays dividends and then later gets taken over for shares in the acquirer rather than for cash. I.e. the income is taxed in whatever tax year it arises, with no effect on the CGT base cost of the holding (unless of course you reinvest it in the same type of share / security, in which case that's a buy with its normal effect on CGT base cost).

So the answer appears to me to be that the interest is indeed treated as income, taxed in the relevant tax year, and as not affecting the CGT base cost - provided the taxation rules for convertible bond interest are the normal ones, which seems very likely to me (but that's a detail I have no experience of and so don't know for certain).

Gengulphus

[gengulphus] 30/8/2019 21:43

American Idiot,

In the 18/19 tax year I opened an Australian CFD (Contracts for difference) account with IG due to new ESMA regulations which came into force in the UK during 18/19 which meant to speculate on my UK CFD account the margin requirements / commission rates were stricter / higher.

Basically, I live in the UK and speculate on UK stocks only using the CFD account opened in Australia.

Have you any idea on tax treatment for this ?

Very little, I'm afraid. The general principle for foreign taxation of a normal UK resident like you is that you're taxed on your worldwide income and capital gains, but if a foreign country taxes you on something and it's a tax that HMRC recognises as equivalent to Income Tax or CGT, then you can offset the foreign tax paid against that particular item of UK tax, up to the amount of UK tax (so if the foreign tax is less than the UK tax, you can offset it all, but if it's more, you can only reduce the UK tax to zero). The upshot of that is that you end up paying total tax (i.e. counting both the foreign tax and the UK tax) that is the maximum of the two amounts of tax, not their sum.

Note that it must be the equivalent tax - you cannot offset foreign income tax paid against UK CGT, nor vice versa. And the foreign tax can only be offset against the UK tax on the same item of income or capital gain. E.g. if a foreign government charges income tax on a dividend paid by a share you hold in an ISA, you're out of luck: there is no UK tax on that dividend, so nothing can be offset against it, and you cannot offset it against tax on other dividends or anything else.

But beyond that general principle, about all I know is that there are numerous special-case rules relating to foreign taxation, and so I can't really say anything definite about your situation. Sorry.

Gengulphus

[jacobsdad] 27/8/2019 17:37

Gengulphus-just picked up reply to my query on return from holidays so a belated thank you for your response

[robo21] 25/8/2019 20:27

Gentlemen
Retired gent opens crypto trading account makes profit 100k
19-20 tax year. What would his capital gain liability be ?

[finkwot] 25/8/2019 19:12

A rather more important question:
If I buy a convertible bond which pays interest, hold it for several years and receive the interest each year, and then convert the bond to ordinary shares, is the cost of those shares the price I paid for the bond? Or is the interest deducted, in whole or in part?

I hope and suspect that the interest is treated as income, taxed in the relevant year, and has no bearing on the cost, but it's best to be sure.

[finkwot] 22/8/2019 14:38

If I acquire shares in a rights issue, is the date of acquisition for tax purposes the closing date for acceptance and payment, or the date the shares are issued?

[attrader] 22/8/2019 14:01

Hi Gengulphus, great to see your generosity in sharing your knowledge. Many thanks. I have a question about CGT tax bracket. I have a company where I receive all my income in dividends and I pay dividend tax rate. For CGT, would I be classified as Basic Rate payer or High rate payer since I don't receive any salaried income ?

[american idiot] 22/8/2019 12:47

Hi Gengulphus,

I am a lifelong UK resident.

In the 18/19 tax year I opened an Australian CFD (Contracts for difference) account with IG due to new ESMA regulations which came into force in the UK during 18/19 which meant to speculate on my UK CFD account the margin requirements / commission rates were stricter / higher.

Basically, I live in the UK and speculate on UK stocks only using the CFD account opened in Australia.

Have you any idea on tax treatment for this ?

On Gov.uk website I found this :-



Which states this :-

Capital Gains Tax

You’ll usually pay tax in the country where you’re resident and be exempt from tax in the country where you make the capital gain. You will not usually need to make a claim.

You have to pay Capital Gains Tax on UK residential property even if you’re not UK resident.

When to claim relief

There are different rules if your gain comes from an asset that either:

cannot be taken out of the country, such as land or a house

you’re using for business in that country

You’ll need to pay tax in both countries and get relief from the UK.

.........

Can I take from above that I would declare as normal UK capital gains ?

There would be no need to claim relief as the different rules do not apply in my case (therefore I wouldn't be double taxed CGT in both the UK and AUS ?)

Many Thanks.

[andyadvfn1] 20/8/2019 09:40

Unaffected by the recent Equity wobble, steady growth over the years, safe as any any to park your money

[gengulphus] 09/8/2019 18:18

jacobsdad,

a quick query-
if in the tax yr 18/19 I had made say £5k gains but also £5k losses-does the £5k loss carry forward?

Afraid not. Losses must be used against gains realised in the same tax year as far as possible - it's only losses in excess of the gains realised in the same tax year that can start being carried forward. So in your scenario, the losses neatly cancel out with the gains.

Just to be clear: this is about £5k gains realised in the 2018/19 tax year and £5k losses also realised in the 2018/19 tax year. If instead you had £5k gains realised in the 2018/19 tax year and £5k losses brought forward from the 2017/18 tax year, the situation would be different: brought-forward losses only have to be used to reduce gains above the CGT allowance, so in that case the losses wouldn't have to be used and could continue being carried forward from the 2018/19 tax year to the 2019/20 tax year.

also just to clarify
if in tax yr 18/19 I had made say £20k gains but also £5k losses-would that have meant
£20k-£11700 allowance=£8300 taxable gain,then-£5k loss=£3300 then taxable ?

Yes, though you've not got the order quite right: first offset the losses £20k-£5k = £15k, then use the CGT allowance £15k-£11.7k = £3.3k. Same result, though!

In fact, if you do the calculation as first same-year losses, then CGT allowance, then brought-forward losses, with unused losses being carried forward but unused allowance being lost, you'll generally get the right answer.

Gengulphus