Capital Gearing Share Price (CGT)

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Share Name Share Symbol Market Type Share ISIN Share Description
Capital Gearing Trust Plc LSE:CGT London Ordinary Share GB0001738615 ORD 25P
  Price Change % Change Share Price Shares Traded Last Trade
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  -40.00 -0.84% 4,710.00 45,954 16:35:22
Bid Price Offer Price High Price Low Price Open Price
4,715.00 4,760.00 4,770.00 4,695.00 4,695.00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Equity Investment Instruments 14.68 10.32 56.81 82.9 999
Last Trade Time Trade Type Trade Size Trade Price Currency
16:35:22 UT 1,829 4,710.00 GBX
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Scottish Mortgage Invest... (SMT), M&g (MNG), Auctus Growth (AUCT), Energiser Investments (ENGI)

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20/3/202311:54UKREGCapital Gearing Tst Net Asset Value(s)
17/3/202311:21UKREGCapital Gearing Tst Net Asset Value(s)
16/3/202316:58UKREGCapital Gearing Tst Transaction in Own Shares
16/3/202312:25UKREGCapital Gearing Tst Net Asset Value(s)
15/3/202317:13UKREGCapital Gearing Tst Transaction in Own Shares
15/3/202312:12UKREGCapital Gearing Tst Net Asset Value(s)
14/3/202312:26UKREGCapital Gearing Tst Net Asset Value(s)
13/3/202317:10UKREGCapital Gearing Tst Transaction in Own Shares
13/3/202312:01UKREGCapital Gearing Tst Net Asset Value(s)
10/3/202312:41UKREGCapital Gearing Tst Net Asset Value(s)
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Trade Time Trade Price Trade Size Trade Value Trade Type
16:35:224,710.001,82986,145.90UT
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Posted at 20/3/2023 08:20 by Capital Gearing Daily Update
Capital Gearing Trust Plc is listed in the Equity Investment Instruments sector of the London Stock Exchange with ticker CGT. The last closing price for Capital Gearing was 4,750p.
Capital Gearing Trust Plc has a 4 week average price of 4,690p and a 12 week average price of 4,690p.
The 1 year high share price is 5,330p while the 1 year low share price is currently 4,690p.
There are currently 21,213,675 shares in issue and the average daily traded volume is 101,540 shares. The market capitalisation of Capital Gearing Trust Plc is £999,164,092.50.
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Posted at 16/10/2021 11:27 by gengulphus
Srtu,

... the following info came from CGT calculator. I suspect something is going wrong in CGT calculator.

I'm practically certain that something is going wrong in CGTcalculator, because of two obviously wrong bits of information in the extra output you've provided. The first that struck me was:

Total number of trades = 7
Total number of buys = 4
Total number of sells = 3

There are 7 trades in your input, but they comprise 4 buys, 2 sells and a rights issue. So it looks as if CGTcalculator is counting the rights issue as a sell, not a buy. It's actually neither a sell nor a buy - but it's a lot closer to being a buy than a sell! It differs from a buy only in that unlike a buy, it cannot be matched to a sell under the same-day or 30-day rules (something that only rarely makes a difference, and doesn't for your example), but from a sell in that it absorbs cash and adds shares rather than the other way around (something which will always make a difference).

This led me to check the rest of the information more carefully, and in the "INFORMATION FOR TAX RETURN" section, I saw "Disposals = 2". Those are clearly the two sells, so CGTcalculator seems to be treating the rights issue as a sell that is not a disposal...

But the first sell has disposal proceeds of 2842*£3.90729 = £11,104.52 and the second 60333*£1.06330 = £64,152.08 (note that their commissions of £6.95 each don't enter into their "Disposal Proceeds" calculations, but instead into the "Allowable Costs" calculations). Rounding those down to whole numbers of pounds, that produces total disposal proceeds for the two sells of £11,104+£64,152 = £75,256, which is £14,851 short of the £90,107 disposal proceeds reported by CGTcalculator. And £14,851 is exactly the result of the disposal proceeds calculation to the rights issue data (46410*£0.32000 = £14,851.20) and rounding down to a whole number of pounds.

So it appears that CGTcalculator is treating the rights issue as a sell that is not a disposal but does have disposal proceeds, when it clearly doesn't have any such proceeds... I'm afraid I cannot help beyond identifying that inconsistency - that requires me to be able to see the full details of CGTcalculator's internal calculations, which I am not. Sorry incidentally that my last post suggested that you might be able to provide them. I was working from a memory that those were available from CGTcalculator that turns out to have been false - I think it's actually something provided by the Stonebanks calculator rather than by CGTcalculator (but I'm afraid I don't think the Stonebanks calculator would solve your problem, because I cannot see that it has any facility to input rights issues).

So that's basically as far as I can go - CGTcalculator's author is presumably the only person who can provide more details of how CGTcalculator is doing the calculations and/or correct any problems with them.

If you want a work-around for the problem, though, I'd suggest you search your CGTcalculator input data for rights issues, and then check each rights issue for sales of the same type of share on the same day or in the preceding 30 days. If there isn't any such sale, change the "Rights" line to a "Buy" line (and append a note to the CGTcalculator output saying something like "The 09/11/2020 buy is actually shares obtained from a rights issue, but treating it as a buy does not alter how it is matched to share sales"). If there is such a sale, extract all the data for that company and do the calculation by hand - but given that rights issues are quite rare and it still requires some bad luck to have sold the same type of share on the same day or in the preceding 30 days, that case shouldn't happen at all often (hopefully not at all).

Gengulphus
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Posted at 13/10/2021 20:45 by gengulphus
Srtu,

Need some help in calculating CGT for the following Portfolio, particularly interested in disposal made after Rights issue. Many Thanks in advance for your help.

Buy/Sell Date Company Shares SharePrice Charges StampDuty Consideration Net Value
Buy 27/03/2020 ABC.L 2842 3.64911 6.95 51.85 10370.77 10429.57
Sell 08/06/2020 ABC.L 2842 3.90729 6.95 0.00 11104.52 11097.57
Buy 25/06/2020 ABC.L 5029 2.96621 6.95 74.59 14917.06 14998.60
Buy 01/07/2020 ABC.L 5012 2.77939 6.95 69.65 13930.31 14006.91
Buy 14/09/2020 ABC.L 3882 2.04854 5.95 39.76 7952.43 7998.14
Rights 09/11/2020 ABC.L 46410 0.32000 0.00 0.00 14851.20 14851.20
Sell 23/11/2020 ABC.L 60333 1.06330 6.95 0.00 64152.08 64145.13

There are no same-day trades, so work through the trades in date order:

Buy 27/03/2020 ABC.L 2842 3.64911 6.95 51.85 10370.77 10429.57

This leaves your 'section 104 pool' containing 2842 shares bought for a total of £10,429.57.

Sell 08/06/2020 ABC.L 2842 3.90729 6.95 0.00 11104.52 11097.57

Match the sale to acquisitions, by first looking for acquisitions within the 30 days following the sale. There are two such acquisitions, namely the 25/06/2020 and 01/07/2020 purchases; the rule is to match to the earliest such acquisition, so match the sale to the 25/06/2020 purchase under the 30-day rule. That purchase is of 5029 shares for a total of £14,998.60, which is more shares than the sale sells, so apportion the purchase into a purchase of 2842 shares to match the sale's size and a purchase of the remaining 5029-2842 = 2187 shares:

* Matching purchase is of 2842 shares bought for £14,998.60 * 2842/5029 = £8,476.04

* Remainder purchase is of 2187 shares bought for £14,998.60 * 2187/5029 = £6,522.56.

Gain on the sale = £11,097.57 - £8,476.04 = £2,621.53, realised on the sale date 08/06/2020 (so in the 2020/2021 tax year).

Note: if the 25/06/2020 purchase had been of a smaller number of shares than the sale, you would instead apportion the sale into a sale matching the 25/06/2020 purchase and a remainder sale, calculate the gain from the matching sale and the 25/06/2020 purchase, and then try to match the remainder sale. Looking for purchases within the following 30 days, the 25/06/2020 purchase would have already been matched and so not available for further matching, but the 01/07/2020 purchase would be within those 30 days and available for matching - and so the remainder sale would be matched to the 01/07/2020 purchase under a further application of the 30-day rule.

Buy 25/06/2020 ABC.L 5029 2.96621 6.95 74.59 14917.06 14998.60

This purchase has been modified by the 30-day rule matching of the 08/06/2020 sale described above, to its remainder purchase of 2187 shares for £6,522.56. Merge that remainder purchase into the 'section 104 pool' of 2842 shares bought for £10,429.57, which results in a new 'section 104 pool' of 2842+2187 = 5029 shares bought for £10,429.57+£6,522.56 = £16,952.13.

Buy 01/07/2020 ABC.L 5012 2.77939 6.95 69.65 13930.31 14006.91

Merge this purchase (which hasn't been modified) into the 'section 104 pool', resulting in a new 'section 104 pool' of 5029+5012 = 10041 shares bought for £16,952.13+£14,006.91 = £30,959.04.

Buy 14/09/2020 ABC.L 3882 2.04854 5.95 39.76 7952.43 7998.14

Merge this purchase (which hasn't been modified) into the 'section 104 pool', resulting in a new 'section 104 pool' of 10041+3882 = 13923 shares bought for £30,959.04+£7,998.14 = £38,957.18.

Rights 09/11/2020 ABC.L 46410 0.32000 0.00 0.00 14851.20 14851.20

In principle, the tricky point about shares obtained in a rights issue is that they don't count as an acquisition for the purposes of the share-matching rules (and the 30-day rule in particular), but essentially as enhancement expenditure on the existing 'section 104 pool'. The result is that the existing 'section 104 pool' of 12923 shares bought for £38,957.18 is enhanced to one of 13923+46410 = 60333 shares bought for £38,957.18+£14,851.20 = £53,808.38.

Note: when there are no sales in the 30 preceding days (as in this case), this is of course exactly the same resulting 'section 104 pool' as you would get if the rights issue had instead been a purchase of 46410 shares for £14,851.20. But if there had been a sale in the 30 preceding days, that sale would not have been matched under the 30-day rule by the rights issue and would be matched under the 30-day rule by the purchase. So while the results of getting 46410 extra shares for £14,851.20 on 09/11/2020 don't depend on whether you get them from a rights issue or a purchase for this particular holding history, they do differ for some holding histories.

Sell 23/11/2020 ABC.L 60333 1.06330 6.95 0.00 64152.08 64145.13

There are no acquisitions in the next 30 days after the sale, so match the sale to the 'section 104 pool'. And since the sale and the 'section 104 pool' have identical numbers of shares, no apportionment is needed. So just calculate the gain or loss directly from them - it's a gain of £64,145.13-£53,808.38 = £10,336.75, realised on 23/11/2020 (so also in the 2020/2021 tax year).

Gengulphus
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Posted at 30/9/2021 15:43 by gengulphus
zangdook,

A couple of years ago ERET decided to wind itself up and as part of the process it delisted. My shares were therefore moved out of my ISA. As this took place after the delisting, there was no market price on the day they were de-ISAed. If I now receive money from the liquidation, what is the cost price of my shares for the purpose of CGT? Is it the actual cost, or the value on the last day of listing, or nil?

I'm afraid I don't really know. The things I do know are:

From https://www.gov.uk/guidance/stocks-and-shares-investments-for-isa-managers#changes-to-investments-held-in-a-stocks-and-shares-isa :

"Where the new investments are not qualifying investments, managers must, within 30 calendar days of the date on which they became non-qualifying investments, either:

* sell them (in which case the proceeds can remain in the stocks and shares ISA)
* transfer them to the investor to be held outside the ISA."

From https://www.gov.uk/guidance/how-to-manage-an-isa-investment-fund#withdrawals-investments-stocks-shares-lifetime :

"On the transfer to an investor of an investment, the manager must provide the investor with details in writing of the market value of the investment as at the date of withdrawal."

followed by a lot of detailed rules about what the "market value" is. The cases covered make it clear that "market value" does not simply mean "market price on the day of withdrawal, or zero if there is no such market price" - it does mean market price (determined by various detailed rules) on the day of withdrawal if there is such a market price, but there are other detailed rules to cover at least some cases where there isn't one. The following might be regarded as covering the case of a share voluntarily delisting on the basis that the Stock Exchange is closed for trading that particular share on the day of withdrawal:

"Where the date of valuation falls on or after 6 April 2015, the market value of shares, qualifying securities or strips included in the official UK list is the lower of the two prices shown as the closing price in the Stock Exchange Daily Official List for that day plus one half of the difference between those two figures.

If the Stock Exchange is closed, the value is that value on the latest previous day on which it was open."

If so, the answer would be the market price on the last day of trading - but that way of regarding the phrase "Stock Exchange is closed" does seem a bit contrived, so I'm not at all confident about that answer! Otherwise, the next bit:

"This doesn’t apply to determine the market value of shares or securities where in consequence of special circumstances the closing prices quoted in the Stock Exchange Daily Official List are by themselves not a proper measure of market value of the shares or securities.

In that case the market value is determined under section 272 of Taxation of Chargeable Gains Act 1992 as the price shares might reasonably be expected to fetch on a sale in the open market."

gives a sort of answer, but as that answer essentially involves using a professional valuer, it's probably not at all satisfactory...

Incidentally, did your ISA manager send you a market value of nil, based on there being no market price on the day of transfer? Or did they not send you a market value at all, either stating the same reason for their failure to do so or just failing to do so without giving any reason for the failure? I ask because one thing you might consider doing is tackling your ISA manager about the issue, and it makes a difference to whether they've failed to meet their obligation to provide you with a market value, or whether it's only a matter of whether you think they've given you a reasonable market value.

One other thing I'll mention is 'post transaction valuation checks' ( https://www.gov.uk/government/publications/sav-post-transaction-valuation-checks-for-capital-gains-cg34 ). They look designed to check valuations being used in a CGT computation, so may not be usable until you dispose of the ERET shares and have a CGT computation to submit - which might take some time. But if for instance you think the share price on the last day of trading is a more reasonable estimate of the market value on the day of transfer than nil, submitting a post transaction valuation check when the time comes would be a reasonable way to demonstrate good faith.

And finally, the lesson to learn is that if the situation of a company you own in your ISA decides to delist comes up again, then:

* if you don't want to still own the shares afterwards, sell them from the ISA while you still can;

* if you do want to still own the shares afterwards and have the cash to repurchase them outside the ISA, sell them from the ISA while you still can and repurchase them outside - you'll lose a bit on trading costs, but you'll keep their value inside the tax shelter of the ISA;

* if you do want to still own the shares afterwards and don't have the cash to repurchase them outside the ISA, withdraw them from the ISA before they delist - you won't keep their value inside the ISA, but at least there will be an easily-determined market value on the day they're withdrawn.

Gengulphus
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Posted at 30/9/2021 13:38 by gengulphus
serratia,

I've held a share for many years and always took the dividend as shares. If I sell some of the shares what do I use as the purchase price? I'm assuming it's the average price of all the dividend shares + the original purchase is that correct?

That's basically correct provided you haven't previously sold any shares from the holding and the holding hasn't experienced some types of corporate action and you don't buy more shares of the same type as you've sold on the same day as you sold or in the following 30 days. Note that it's particularly easy to inadvertently end up buying again within 30 days after a sale if you're automatically reinvesting dividends in more shares... (Personally, I reckon that automatic dividend reinvestment is OK in ISAs and SIPPs, but more trouble than it's worth for shares held in an ordinary trading account or as certificates.)

I will however comment that it's generally easier to do the calculations in 'N shares bought for a total of £X' terms rather than 'N shares bought at an average price of £P' terms - it can be done the second way, but you'll forever find yourself dividing by N to arrive at the average price, and then multiplying the average price by N again to get the total amount spent early in the next CGT calculation...

So basically, add up the total number of shares you've got and the total amount of money you've spent on them (*). Then if you sell M shares, you're selling M/Nths of the 'N shares bought for a total of £X', which is 'M shares bought for a total of £X*M/N', and what you're left with is 'N-M shares bought for a total of £X - £X*M/N'.

If you have sold some of the shares previously (perhaps in a year when it was clear that you didn't have CGT to pay), or they've undergone corporate actions such as share splits, share consolidations, bonus issues, rights issues, open offers, B share schemes, company mergers, company demergers, etc, or if you end up buying that type of share on the same day as the sale or in the next 30 days, ask again with details of what situation you need to know how to handle. Some of them are quite easy to handle, others rather more complex - but the main reason why I'm not giving details is not complexity, but just the sheer number of different situations that can occur!

(*) Note that the total amount of money you've spent on them doesn't include any 'change' left over from purchases of whole numbers of dividend shares - though if the dividend share scheme carries such 'change' forward to the next dividend share purchase, that only applies to the 'change' from the most recent dividend share purchase.

Gengulphus
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Posted at 29/7/2021 22:37 by gengulphus
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 https://www.londonstockexchange.com/news-article/AAA/proposed-placing-acquisition-and-cancellation/15042861 . 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 https://www.meshholdings.net/wp-content/uploads/MESH-Announcement-on-in-principle-agreement-with-All-Active-Asset-Capital-Limited-2-July-2021.pdf 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
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Posted at 21/2/2021 12:18 by gengulphus
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
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Posted at 23/9/2020 18:00 by gengulphus
Does anyone else out there think CGT might be an easy target for the chancellor in his quest to fill the financial black hole caused by Covid?

I don't. A target, quite possibly - but not an easy target... It's not easy because to a large extent, CGT is a voluntary tax - make changes designed to raise more CGT from investors, and investors are likely to respond by changing their strategies to be more likely to hold on to investments carrying a large unrealised capital gain rather than selling them and realising the gain... Doing that won't always be possible - sometimes people need the cash or the sale is compulsory for one reason or another - but I suspect there will be plenty who shift to a long-term buy & hold strategy if CGT becomes a serious burden...

Also, the investors most likely to want not to do that are those who use shorter-term 'trading' strategies. But many of them will have bought their shares last year and so will be sitting on plenty of unrealised losses, not gains...

He might remove the £12300 allowance, he might increase rates, he might do both.

Removing the CGT allowance strikes me as very unlikely, at least as things stand. Why? Because then everybody who makes even a small capital gain becomes liable to account for CGT, either in a tax return or using some sort of adjustment to their tax code - but that adjustment is likely to change every year, in a hard-to-predict way, so would require some sort of annual return from the taxpayer anyway. Either way, there would be a big increase in the number of CGT returns HMRC would need to process, quite often for very small amounts of tax collected - so removing the CGT allowance entirely would probably not be cost-effective because of high collection costs relative to the amount of tax collected. And in addition, it would also have high political costs for the government - a CGT return is a distinctly user-unfriendly bit of bureaucracy and making large numbers of voters do them who hadn't had to before is likely to alienate a considerable number of voters!

That said, I do think reducing the CGT allowance might be an option for the Chancellor. E.g. halving it rather than removing it entirely would affect far fewer taxpayers and would tend to be focussed on those with the largest capital gains among those who currently don't pay CGT, as well as producing a substantial increase in CGT collected from those who do currently pay CGT. That's more likely to be cost-effective from the Chancellor's point of view, both with regard to collection costs and political costs.

And increasing CGT rates is also an option. But both reducing the allowance and increasing rates are going to be limited in terms of how much they're likely to raise, due to the 'largely a voluntary tax' nature of CGT mentioned above.

Various parts of that assume that the structure of CGT and collecting it remain largely as they are at present, and there are possibilities available for more fundamental revisions of CGT that would change the argument. For instance, brokers cannot currently give definitive statements about what capital gains and losses have been realised by sales in a broker account they provide, because if the accountholder has other holdings of a share (either certificated or held with another broker), CGT rules require the capital gains and losses to be calculated from the merged transaction record for all the holdings, not separately for each holding and the results added together. If CGT were revised to work on a 'separately on each holding and add together' basis, it would become possible for brokers to produce definitive CGT statements, and therefore for the government to require them to do so. And if that were done, CGT returns by individual taxpayers could become just a matter of taking the figures from each broker they use and adding them up - much as they handle dividends at present. That would be likely to reduce the costs significantly, both collection costs and political costs.

Another example of a fundamental revision that might be attractive to the Chancellor is finding some way to tax all gains, whether realised or not (though the attractiveness of that might not be all that high at present, given recent losses...). But both of these fundamental revisions have a whole mass of practical detail to be designed - for example, how are transfers from one broker to another handled? how are certificated holdings handled? what happens if someone has big unrealised gains on shares that for some reason they cannot sell? and many others...

So while fundamental reform of the CGT system might be a way for the Chancellor to effectively target CGT as a source of significant extra tax revenues, I'm pretty sure it's not an easy way for him to do so.

Gengulphus
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Posted at 15/7/2020 17:31 by gengulphus
azalea,

If I do not exceed my annual Capital Gains tax allowance, do I still have to declare to HMRC the number of shares I have bought and sold in the tax year?

If HMRC require you to fill in a tax return, the instructions for doing so are in https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/874084/SA150_English_Notes.pdf - that's the version that accompanies the paper tax return because I cannot give any equivalent link for the online tax return. The rules for the two types of tax return are essentially the same, though, so it does give you the answer about whether you should fill in the capital gains part of the online tax return:

"7 Capital gains summary

Fill in the ‘Capital gains summary’ pages and attach your computations if:

• you sold or disposed of chargeable assets which were worth more than £48,000

• your chargeable gains before taking off any losses were more than £12,000

• you want to claim an allowable capital loss or make a capital gains claim or election for the year

• you were not domiciled in the UK and are claiming to pay tax on your foreign gains on the remittance basis

• you’re chargeable on the remittance basis and have remitted foreign chargeable gains of an earlier year

• you sold or disposed of an interest in UK land or property and were not resident in the UK or you were a UK resident and overseas during the disposal

• you submitted a Real Time Transaction return on the disposal of an asset and have not paid the full amount of Capital Gains Tax"

The first three of those are the important ones for most people (the next three are only important for those with complications due to foreign residence, domicile, etc, and the last is something I've never come across). Together, they mean that in order to avoid having to fill in the Capital Gains part of the tax return, the total proceeds of your sales must be at most four times the CGT allowance and the total gains of your profitable sales (i.e. without offsetting the losses of your loss-making sales) must be at most the CGT allowance. For the first of those, the proceeds of a sale are the number of shares sold times the price obtained per share, without deducting broker commission or any other incidental costs - so a bit more than the final amount credited to your account for the sale.

So you can be required to fill in the Capital Gains part of a tax return even though you don't have any CGT to pay, and since filling it in also requires you to submit your CGT computations, yes, you can be required to give numbers of shares sold along with other details of the sales, as well as similar details of the purchases of those shares (which could be in either the same tax year or in previous tax years, and can even be in the following tax year in some cases where the '30 day rule' is involved). There are basically three situations in which you have no CGT to pay but have to fill in the Capital Gains part of a tax return, or want to:

A) Your total proceeds from sales for a tax year exceed four times the CGT allowance but your total gains (without offsetting losses) from the profitable sales are under the CGT allowance.

B) Your total gains (without offsetting losses) from the sales for a tax year are over the CGT allowance, but you have enough losses (or other claims or elections) from those sales to be able to offset them to below the CGT allowance and so pay no CGT.

C) Your losses from the sales for a tax year are greater than your gains from those sales, so you can offset all the gains and still have losses remaining.

In situations A) and B), you have to fill in the Capital Gains part of the tax return if you're asked to submit one. In situation C), you're not obliged to fill it in, but you probably want to, because you can carry the net losses remaining after offsetting all the gains forward to future tax years, and they will eventually save you CGT unless you die before the opportunity for them to do so arises. (I should add that the rules for using losses brought forward from earlier tax years are a bit more generous than those for losses from sales in the same tax year: they don't have to be used offsetting gains that are already under the CGT allowance.)

That leaves the case that HMRC haven't required you to submit a tax return. In that case, you're not legally required to submit one immediately, but you do have to check whether you have Income Tax and/or CGT to pay for the tax year, and if so, to notify HMRC of that situation ( https://www.gov.uk/hmrc-internal-manuals/self-assessment-legal-framework/salf210 ). HMRC are able to react to such a notification in various ways, but one reasonably likely one is that they'll require you to submit a tax return.

In situation A), you don't have CGT to pay, so unless you have Income Tax to pay, AFAIAA you're not obliged to do anything if HMRC don't require you to submit a tax return.

Situation B) is trickier. The issue is that you need to offset losses in order to have no CGT to pay, but you have to 'claim' a loss by telling HMRC about it to be able to use it to offset gains. So one way or another you need to tell HMRC the details of the losses, and it's at least reasonably likely that that will eventually lead to HMRC requiring you to submit a tax return.

Situation C) is again a case of wanting to tell HMRC about the situation in order to 'claim' the losses concerned. There's a time limit on doing so: a loss that hasn't been 'claimed' by 4 years after the end of the tax year in which the sale happened can no longer be 'claimed'. So there's no immediate need to inform HMRC of the details, but there is a need to do so eventually (note that once 'claimed', there's no deadline for actually using the loss to offset gains, other than your death).

Gengulphus
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Posted at 25/1/2020 12:20 by gengulphus
Erogenous Jones,

I'm sorry, but I think I have to largely pass on your question, because discretionary trusts and their taxation go well beyond my knowledge and experience. About all I can say is that if the rules for capital losses are the same as they are for individuals (which seems reasonably likely to me, but it's not something I know for a fact), then:

* Gains and losses only arise (or are 'realised' in taxspeak) for CGT purposes if and when the assets are disposed of (usually by sale). So the trustees are to a large extent in control of which gains and losses arise for CGT purposes - they can prevent excessive gains or unneeded losses from arising by choosing not to sell, or cause losses needed to offset excessive gains (or enough gains to use the CGT allowance) to arise by choosing to sell. There are of course other forms of disposal that the trustees don't have a choice about, such as having a shareholding taken over or having made a fixed-term investment that matures, so they won't necessarily be able to totally control which gains and losses arise for CGT purposes - but they will generally have quite a lot of control.

* When considering selling for the CGT effects, do pay attention to the old maxim that one shouldn't let the tax tail wag the investment dog - if there's a clear investment case for selling, do sell, and if there's a clear investment case for holding, don't sell, in both cases even if that means that the trust pays more CGT. But if the investment case is unclear, using the CGT effects as a tiebreaker between selling and not selling can be a reasonable idea.

* Also watch out about trading costs: at 1%ish, they may seem small compared with 20% CGT, but they're a percentage of the total capital and the CGT is a percentage of the gain or loss - so if e.g. an investment is standing at a 5% loss, selling to save CGT by offsetting the loss is likely to cost about as much as it saves...

* Once a loss has arisen by the asset being disposed of, one needs to tell HMRC about it (known as 'claiming' the loss) within 4 years after the end of the tax year in which it arose if one is ever to use it to offset gains. It also has to be used to offset gains that arose in the same tax year to the extent that there are such gains, even if those gains fall within the CGT allowance. Losses that arise in a tax year and are in excess of gains that arose in the same tax year can be carried forward to be used in later tax years, provided HMRC are told about them within the 4-year time limit. Note that once HMRC have been told about such a loss, it gets carried forward until it's needed because gains exceed the CGT allowance (unlike same-year losses, brought-forward losses do not have to be offset against gains below the CGT allowance), with no time limit on how long it might take.

As some examples:

A) Suppose that the trust realised a loss of £1,000 and no gains in the 2015/2016 tax year, and that the trust hasn't realised gains in excess of the CGT allowance since then. That loss can be carried forward through all of those tax years and will continue to be available into the future, provided HMRC are told about it (with details - i.e. what was sold, when, how much it was sold for and how much it had cost, etc) by the deadline, which is April 5th this year (four years after the end of the 2015/2016 tax year).

B) Suppose that the trust realised a loss of £1,000 and a gain of £500 in the 2015/2016 tax year, and that the trust hasn't realised gains in excess of the CGT allowance since then. The first £500 of that loss has to be offset against the gain, but the remaining £500 can be carried forward through all of those tax years and will continue to be available into the future, provided HMRC are told about it (with details - i.e. what was sold, when, how much it was sold for and how much it had cost, similar details of the gain it was partially offset against, etc) by the same deadline.

C) Suppose that the trust realised a loss of £1,000 and a gain of £1,500 in the 2015/2016 tax year, and that the trust hasn't realised gains in excess of the CGT allowance since then. That loss has to be offset entirely against the gain and none of it can be carried forward, and (AFAIAA) the difference between having £1,500 net gains and £500 net gains in the 2015/2016 tax year makes no difference to the fact that no CGT was payable for that tax year. So while the trustees could provide details to 'claim' the loss, there would be no point in doing so (and if the trust tax return is like the individual one, the question it asks is whether one wants to claim losses, so one can truthfully answer it "No" in such circumstances).

I should end this reply (which seems to have grown longer than I anticipated!) by again stressing the fact that it's based on my knowledge of CGT as it applies to individuals, and is only relevant to CGT as it applies to trusts to the extent that the rules are the same. Whether they are the same is something I'll have to leave to you or others to determine.

Gengulphus
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Posted at 31/8/2019 14:06 by gengulphus
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
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