Capital Gearing Share Discussion Threads

[gengulphus] 04/8/2021 04:35

squidd,

I'm absolutely delighted with your response to my ISA query. It is far more detailed than that which I had from the Govt. ISA Helpline, which chimes with your remarks about the original authors of those regulations. ...

Probably just a bit of unfortunate phrasing, but I didn't make any remark about the authors of any regulations! Instead, I made a remark about the authors of an announcement by All Active Assets Capital Limited (the first link I gave): they basically say themselves that they don't fully understand how the ISA regulations apply in this situation - but they're not the authors of the ISA regulations.

... You must have carried out much research to compile this response, and I cannot thank you enough. I wish I could reward you in some way; thus if you name your favourite charity, I will ensure they get a donation.

Sightsavers International ( ) - as their name suggests, their work is basically to prevent people losing their sight to diseases such as trachoma and river blindness.

Gengulphus

[squidd] 01/8/2021 09:35

Hi Gengulphus:

I'm absolutely delighted with your response to my ISA query. It is far more detailed than that which I had from the Govt. ISA Helpline, which chimes with your remarks about the original authors of those regulations. You must have carried out much research to compile this response, and I cannot thank you enough. I wish I could reward you in some way; thus if you name your favourite charity, I will ensure they get a donation.
With grateful thanks, squidd.

[gengulphus] 29/7/2021 22:40

Sorry both of you have had to wait a few weeks for replies - I'm afraid that I don't visit these boards anything like as much these days as I once did. And I'm also afraid that situation isn't likely to change...

Gengulphus

[gengulphus] 29/7/2021 22:37

squidd,

... in recent years, as I aged (now 90), I greatly simplified my affairs to only pension and ISA investments only, so had to do no tax return for about 6 years. But one of my ISA investments has turned sour, and prompted me to look again to this site, where I'm delighted to find you still at it, and hopeful that you can advise.

I held MESH shares in an ISA, but a couple of years ago, pending reorganisation and transformation, they delisted from AIM. Then a couple of months ago my brokers, EQi (formerly Selftrade) wrote telling me that MESH were no longer eligible for an ISA listing and they transferred my holding to a Dealing Account at zero value and zero cost. Thus exposing me to CGT etc at any valuation above zero. To further complicate matters, EQi are themselves reorganising, and they transferred my account to Interactive Investor.

Meanwhile MESH have announced that reorganisation is nearing completion, and they hope to transform the shares into another company AAQA, by way of a special one for one dividend, which will then be listed on an exchange.

I assume that this is the deal described in . It's a messy situation that I don't completely understand, and neither do the authors of that document, judging by its statement that "When the title of an investment in an ISA is transferred from an ISA manager to an investor, the investor is deemed to have sold the investment for a market value sum and immediately reacquired it for the same amount. Any notional gain on the deemed sale is exempt from charge. Any future capital gains or losses are calculated by reference to the value of the shares when they left the ISA. This is the combined effect of regulation 22 and 34 of the Individual Savings Account Regulations 1998. It is not, however, clear how this general tax treatment applies when shares are transferred out of an ISA after a delisting." I'm a bit surprised that EQi decided that the transfer-out-of-ISA happened at zero value, given that it appears that the shares still have some value - I rather suspect that they took the view that shares which cannot be sold in a stockmarket have zero market value, when "market value" is supposed to be what one can reasonably expect to sell an asset for to a willing buyer.

However, that might not result in a "market value" which is all that much more than zero - i.e. it may not make all that much difference to CGT calculations, and so EQi's zero valuation at the time of the transfer out of the ISA may not be worth fighting...

And there's another point: if you sell no more than a CGT allowance's worth of shares in a tax year, then unless you realise some other gain in the tax year (which your post suggests is most unlikely!), then your total realised gains in that tax year cannot be more than the CGT allowance - so you won't have any CGT to pay, and even if HMRC require you to fill in a tax return, you won't have to fill in its capital gains section or submit any capital gains computations.

So the way I would be inclined to deal with the situation is to sell your MESH shares as soon as you can, except don't sell more than £12,300 worth in this tax year or the relevant year's CGT allowance worth in any future tax year. I.e. basically absorb this messy CGT situation harmlessly in your CGT allowances as soon as it's possible to do so...

Having said that, I'm not clear whether any opportunity to sell your MESH shares will arise - the MESH announcement might mean that MESH ends up winding itself up with a distribution of about 2p per share without ever being able to be sold on a market. If so, I believe that would basically be treated like a forced sale for about 2p per share for CGT - so it shouldn't be a CGT problem unless you have more than about 615,000 MESH shares.

If the AAQA shares (which I assume the "AAA shares" in the MESH announcement) are distributed as a special dividend, I believe the tax treatment is that they count as dividend income equal to their value when distributed, and their base cost for CGT purposes is that same value. So I think the CGT position on them will be clear, and you should be able to avoid any CGT needing to be paid on them by selling them before their price rises enough to create a gain of more than £12,300. But Income Tax will probably have to be paid on the special dividend if it plus any other non-ISAed dividends you receive are more than your dividend allowance of £2,000.

But I'm afraid you can't take any of what I say above as a definite answer - the documents I'm basing it on simply contain too many uncertainties for definite answers to exist at this stage (e.g. the "It is currently envisaged that, subject to further tax, legal and other considerations, ..." at the start of the sentence about the special dividend in the MESH announcement pretty clearly indicates that what is envisaged might change if those considerations don't work out well).

Hopefully things will become more definite in the future.

Gengulphus

[squidd] 10/7/2021 13:02

Hi Gengulphus: I last visited this site about 8 years ago and was amazed at the detail and quality of your posts, which were very helpful to me, But in recent years, as I aged (now 90), I greatly simplified my affairs to only pension and ISA investments only, so had to do no tax return for about 6 years. But one of my ISA investments has turned sour, and prompted me to look again to this site, where I'm delighted to find you still at it, and hopeful that you can advise.

I held MESH shares in an ISA, but a couple of years ago, pending reorganisation and transformation, they delisted from AIM. Then a couple of months ago my brokers, EQi (formerly Selftrade) wrote telling me that MESH were no longer eligible for an ISA listing and they transferred my holding to a Dealing Account at zero value and zero cost. Thus exposing me to CGT etc at any valuation above zero. To further complicate matters, EQi are themselves reorganising, and they transferred my account to Interactive Investor.

Meanwhile MESH have announced that reorganisation is nearing completion, and they hope to transform the shares into another company AAQA, by way of a special one for one dividend, which will then be listed on an exchange.

Any advice greatly welcomed.

s£d.

[topvest] 13/6/2021 19:14

This is a superbly articulated summary. Positioned for inflation and value equities + lots of spare firepower!
Noted that their portfolio is totally absent any BG investment trusts. They have had a wonderful journey, but inflation is going to kill the valuation of loss-making disruptor bubble stocks!

[topvest] 13/6/2021 19:12

Outlook
The term “the Great Moderation” was popularised by Ben Bernanke to describe the twenty years following the mid-1980’s. This period was characterised by the extending length of the business cycle and the absence of significant recessions. The last 12 months has seemed to us the opposite, a Great Acceleration, containing a recession of historical proportions and an astonishingly rapid rebound. The change in investor sentiment has been even more precipitate leaving equities, most notably in the US, at valuations that suggest moderate prospective returns. Valuations in UK equities look more attractive but it seems unlikely any regional market can deliver strong returns whilst a bubble in US equities deflates.
Returns from conventional bonds seem certain to endure a poor decade. The pandemic response programmes have involved fiscal and monetary intervention on a mind blowing scale. There is no meaningful political constituency anywhere arguing for sustainable fiscal policies; austerity is dead. The demands to build back better and to fund green infrastructure will ensure vast government deficits for years to come. If bond holders try to push up yields to compensate for increased risks it seems likely central banks will cap the process by increasing their bond buying programmes. Over the last decade the primary objectives of central banks have migrated from inflation targeting to social and environmental goals. These broader societal goals are best advanced through monetising government deficit spending. This leaves resurgent inflation as the most likely mechanism by which conventional bond holders will see their savings eroded, and equity markets will be simultaneously undermined.
If these risks transpire then the returns on a conventional 60 : 40 (equity : bond) portfolio will significantly disappoint. That process will help to reduce the wealth inequalities that have become an increasingly prominent feature of western societies over recent decades. Whilst potentially desirable on a societal level, the aim of this Company is to protect its shareholders from this process. In our view a defensively oriented portfolio emphasising inflation protected bonds, broadly spread value-biased equities and some ‘dry powder’ set aside seems prudent positioning for an uncertain future. If we are in a Great Acceleration we will not need to wait long for the next chapter of this fascinating story to unfold.

[panshanger1] 01/5/2021 10:19

Thanks Good read

[rambutan2] 30/4/2021 20:51

Always interesting commentary:

[...]

Not allowing me to post the direct link for some reason, but is the quarterly which out today.

[optomistic] 27/4/2021 08:52

Gengulphus, good to see you are keeping an eye on the 'boards'
...I was about to refer Constable Ken to your BB, a most valuable site for taxation issues, thank you so much for your continued work on there.
Regards opto

Somehow I got a bit mixed up there, something to do with me selecting a target then the arrow jumping elsewhere!
Maybe a new puta wold be a help :-/

[gengulphus] 23/3/2021 17:56

Constable Ken,

If my income is below my personal allowance of £12,500, does this in effect increase my CGT allowance?

Sorry, but the answer is no. Personal allowance that hasn't been used on income cannot be used against CGT, just as CGT allowance that hasn't been used on capital gains cannot be used against Income Tax.

Gengulphus

[constable ken] 18/3/2021 09:15

It's a long time since I got anywhere near liability for CGT, and I've forgotten most of what I used to know, but due to some badly-timed takeovers my run of luck may be nearing its end.

If my income is below my personal allowance of £12,500, does this in effect increase my CGT allowance?

Say I have income of £10,000 and gains of £15,000. Is my CGT bill

10% of
£15,000 gains
minus
£12,300 CGT allowance
=£270?

Or is it

10% of
£15,000 gains
minus
£2,500 unused personal allowance
minus
£12,300 CGT allowance
=£20?

[gengulphus] 21/2/2021 12:57

s2lowner1,

Moving on to:

I have records of share contract notes (tax invoice) going back 20 years which are bulky so was wondering what year can I shred them upto and what would I need to keep to prove my historic reported HMRC losses if required to do so ? I have submitted yearly returns recording the losses with spreadsheet back up which have never been contested

and:

HMRC says Businesses must keep records for 5 years after the deadline. but I can't see anywhere it says the same for personal CGT losses.

My view is that a CGT event happens when you sell, and that you need to keep the documentary evidence for all the inputs to the gain/loss computation for that CGT event until enough time has gone by since the sale. So I would keep all documentary evidence about open positions indefinitely, and about closed positions until enough years have gone by since they were closed. I'm not certain how many years is enough, but the largest number I've seen mentioned is troutisout's 7 years.

I do realise that where paper records are concerned, that can result in quite bulky records - I've got records myself that in the case of one open position go back about 37 years! Fortunately, they're not accumulating at anything like the rate they once were, as most stuff is done electronically these days. And I think one could make a good case for scanning one's old paper records and any new ones that do arrive, which allows all the records to be held electronically and in a consistent filing system. Then the paper originals just get put in a box labelled with the tax year and stashed away somewhere out of the way, and then destroyed say 7 years later. And the electronic copies are much less bulky...

The main problem is that if one accumulated a lot of paper records before share investing became mainly electronic (or has been reluctant to be a guinea pig for new systems, preferring to let them bed in for a number of years), quite a lot of scanning can be required...

Gengulphus

[gengulphus] 21/2/2021 12:18

s2lowner1,

As I understand

You do not have to REPORT losses straight away - you can claim up to 4 years after the end of the tax year that you disposed of the asset. But you can use recorded losses as far back as before 1996

The whole business of reporting and using losses is a bit complex, and I can't really tell from what you say whether you've understood it correctly or not. So I'd better lay it out as best I can:

* A taxable gain or loss (neither gains and losses made inside ISAs and SIPPs are taxable) is 'realised' on a specific date - normally the date on which you sell the shares or otherwise transfer them to someone else's possession (e.g. as a gift), though there are a few other ways of determining the date (e.g. the date you name within a negligible value claim). You fix it at the time you sell (or give them away, make the negligible value claim, etc) and that is the date on which they enter your CGT affairs.

* You 'claim' a loss by declaring its details to the taxman during the tax year during which it is realised or one of the following 4 tax years. If you don't claim it in that time period, it becomes forever unusable. Exceptions: Losses realised in the 1995/1996 tax year or before have no time limit on when they can be claimed. Also, if I remember correctly, losses realised in tax years between 1996/1997 and 2003/2004 could be claimed up to the January 31st about 5 years and 10 months after the end of the tax year in which they were realised, and losses realised in the 2004/2005 tax year could be claimed up to the end of the 2009/2010 tax year. It's not guaranteed that I've remembered those past details correctly - but I'm not going to try to look them up because all they affect is the validity of loss 'claims' made in the past. As far as the present situation is concerned, losses realised in the 1995/1996 tax year or before can be claimed; losses realised in the tax years from 1996/1997 to 2015/2016 cannot be claimed; losses realised in the 2016/2017 tax year through to the 2020/2021 tax year can be claimed (though there's only about six weeks left in which losses realised in the 2016/2017 tax year can be claimed - on April 6th, they cease to be claimable).

* It is important to understand that while you can delay claiming a loss, that doesn't alter the date that it is realised and enters your CGT affairs. E.g. if you realised a loss in the 2016/2017 tax year and only claim it now, it's not automatically usable in a 2019/2020 tax return that you're submitting now: basically, you first need to revisit your 2016/2017 tax return. Then if that revisit changes the losses you carry forward into 2017/2018, you need to revisit your 2017/2018 tax return. Then if that second tax return revisit changes the losses you carry forward into 2018/2019, you need to revisit your 2018/2019 tax return. Then if that third tax return revisit changes the losses you carry forward into 2019/2020, it actually affects the tax return you're submitting now.

In particular, if the loss realised in 2016/2017 would have been completely used up against gains realised in 2016/2017 and those gains were covered by your 2016/2017 CGT allowance anyway, then none of them get carried forward to any of the later tax years, and so the loss doesn't affect the tax return you're submitting now.

* The normal way to claim a loss is in the tax return for the year in which it was realised, and of course you normally prepare and submit that tax return in the year following the year in which it was realised. If you're required to fill in that tax return and to include its capital gains section and computations, then that section and computations are covered by your declaration that the tax return is complete and correct to the best of your knowledge and belief. I.e. if you're obliged to fill in a tax return including capital gains details, then deliberately failing to claim a loss realised in the tax year concerned involves making a false declaration - which is something you can get into trouble for. Of course, it's possible to make an inadvertent mistake - but if you do and it comes to light, don't be surprised if the taxman asks you to explain how it came about.

* Looked at another way, the 4-year period for claiming losses isn't really intended to be used by those who normally have to deal with CGT. It's mainly there for those who haven't had to deal with CGT before, or only very occasionally have to.

* As far as how losses are used, you normally simply have to follow some fixed rules, without being able to make any choices. You start knowing the total G of the taxable gains realised in the tax year, the total L of the taxable losses realised in the tax year (excluding any that weren't claimed in time), the total B of the losses brought forward from the previous tax year, and the CGT allowance A for the tax year. The fixed rules can be summarised as "first use same-year losses, then CGT allowance, then brought-forward losses" - in precise detail, they are:

1) If L > G, then all gains are wiped out by same-year losses, and you have surplus same-year losses of L-G. You carry those surplus same-year losses forward into the next tax year, along with all brought-forward losses. So you have no taxable net gains to be taxed, and the losses carried forward into the next tax year are B+L-G.

2) Otherwise, all the same-year losses are used up reducing your net gains to G-L. If they're within the CGT allowance, i.e. if G-L <= A, then the CGT allowance reduces them to zero, and the brought-forward losses are untouched. So you are left with no taxable net gains to be taxed, and the losses carried forward into the next tax year are just B.

3) Otherwise, the CGT allowance is also all used up, reducing your net gains to G-L-A, which is still positive. If they're less than or equal to the brought-forward losses, i.e. if G-L-A <= B, then enough of the brought-forward losses are used up to reduce them to zero. So you are left with no taxable net gains to be taxed, and the losses carried forward into the next tax year are B-(G-L-A).

4) Otherwise, the brought-forward losses are also all used up, and you still have net gains. So you have G-L-A-B taxable net gains to be taxed, and the losses carried forward into the next tax year are zero.

* I said "normally" above because there are some unusual cases (such as 'clogged losses') where a loss can be used, but only in certain ways. In those cases, you might get a choice about whether you consider using those losses before or after other losses which ends up affecting which losses get used and which don't. But I don't know any details about that - not even whether you actually get such a choice - so this is basically just to say that I cannot say that people never get any choice about how to use losses, just that they normally don't.

Gengulphus

[pedr01] 18/2/2021 07:14

Good to know that you are fit and healthy G ...

[gengulphus] 17/2/2021 22:22

bunlop,

Redcentric (RCN) paid shareholders compensation for people who purchased shares between 9/11/15 and 7/11/16. I sold all my holding on 7/11/16. But I have now been paid £1305 compensation which I received on 06/8/20 following an agreement between Reedcentic and the FCA.
Is this subject to tax and if so what tax and how do I declare it?

Sorry I haven't been around for so long - various personal matters have distracted me from coming here for so long that I've got out of the habit...

But you haven't lost out as a result, because I'm afraid I have no idea about the answer to your question! Basically, it's not a situation I've ever experienced myself, nor something I happen to have come across while investigating something else.

Gengulphus

[lozzer69] 03/2/2021 09:32

Thanks for your comments and I think I will try both cgt and pnl . I was in Rcp for years but left as disappointed it's with pandemic performance and also fees are high.

[panshanger1] 02/2/2021 08:25

CGI definitely racier !!But a different animal Skyship - CGT is a wealth preservation trust as is Personal Assets, they have a very sizeable allocation to government bonds and US treasuries or example Go back a bit further and see how CGT behaved in 2008 and through other large market corrections Of course that's not to say you can't own CGI as well all depends how you want to structure your portfolio

[skyship] 01/2/2021 15:24

CGT - RACIER!!! Sorry panshanger, but surely you're setting your targets far too low....

# Premium = 2.4%
# Yield = 0.9%
# NAV growth: 3yr @ 3.9%pa; 5yr @ 8.5%pa; 10yr @ 7.0%pa

I just can't figure why you would accept such performance.

Try CGI...Geo. diversification to Canada - great performance, yet still trading on a 30% discount & 3.5% yield. Worth a look to where the grass is greener...

[panshanger1] 01/2/2021 14:21

I think CGT is a little bit racier - not much, I hold both and have done for many years I also have a smallish allocation to RIT capital which operates in a similar way but is more volatile with its unquoted holdings - still always happy to invest alongside the Rothschild family ( ex Nat who's not involved)

[s2lowner1] 28/1/2021 17:45

Thanks troutisout I will do another search before I shred

[troutisout] 28/1/2021 15:55

If you carry them forward each year on CGT part of tax return they are with you for as long as you don't need them.

It will tell you on the HMRC website, but I think the suggestion is you keep tax records going back 7 years.

[s2lowner1] 28/1/2021 15:52

As I understand

You do not have to REPORT losses straight away - you can claim up to 4 years after the end of the tax year that you disposed of the asset. But you can use recorded losses as far back as before 1996

HMRC says Businesses must keep records for 5 years after the deadline. but I can't see anywhere it says the same for personal CGT losses.