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cgt position when takeovers are for cash and shares and one held shares in both companies

Practical Issues
Bouleversee
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cgt position when takeovers are for cash and shares and one held shares in both companies

#23832

Postby Bouleversee » January 17th, 2017, 4:56 pm

I held 539 shares in BG which cost me £7,146.99 and 492 shares in RDSB which had cost me £9,605.80. At the takeover last February, I received £2,064.37 cash and 240 RDSB shares. As I understand HMRC's guidance notes on this subject, I don't have to declare anything in my 2015-16 tax return because the cash payment is less than £3000 and I don't need to work out whether the cash was "less than 5% of the value of your shares in the company valued just before the takeover" (presumably BG rather than RDSB) and when I dispose of the RDSB shares the cost I will have to put down will be the acquisition cost of my BG shares plus that of my original RDSB shares minus the cash received at the t/o. I ask this because I-web have the book cost down as £16,751 so they have amalgamated the 2 costs but not deducted the cash proceeds. Am I right or not, and whose job is it to get this right on on-line brokers valuations?

Apart from finishing my tax return, I am trying to get all the portfolio histories on my computer up to date and correct so that when I pop my clogs, my sprogs won't find themselves in the mess I'm in now; I have several large cardboard boxes full of papers which have been dumped in them when my husband was ill and there was no time to do anything with them.

I may be back!
Last edited by Bouleversee on January 17th, 2017, 5:03 pm, edited 1 time in total.

genou
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Re: cgt position when takeovers are for cash and shares and one held shares in both companies

#23837

Postby genou » January 17th, 2017, 5:03 pm

Bouleversee wrote:I held 539 shares in BG which cost me £7,146.99 and 492 shares in RDSB which had cost me £9,605.80. At the takeover last February, I received £2,064.37 cash and 240 RDSB shares. As I understand HMRC's guidance notes on this subject, I don't have to declare anything in my 2015-16 tax return because the cash payment is less than £3000 ..... Am I right or not, and whose job is it to get this right on on-line brokers valuations?


You are right with your approach. There is no hope for the broker to get your cost base right, because they don't know anything about what you may hold elsewhere. Gengulphus had a recent post on this, probably on this board. It's your problem, I'm afraid.

Bouleversee wrote:Apart from finishing my tax return, I am trying to get all the portfolio histories on my computer up to date and correct so that when I pop my clogs, my sprogs won't find themselves in the mess I'm in now; I have several large cardboard boxes full of papers which have been dumped in them when my husband was ill and there was no time to do anything with them.

I may be back!


As long as they know what your holdings are, the cost base is irrelevant, since it will reset to market value on inheritance. Every cloud.....

Bouleversee
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Re: cgt position when takeovers are for cash and shares and one held shares in both companies

#23840

Postby Bouleversee » January 17th, 2017, 5:14 pm

Genou -

Well, I'm only talking about the book cost of the holding in that portfolio, which contained both the BG shares and the RDSB shares and they received the cash, so I don't see why it should be so difficult. They have altered the book cost of the RDSB shares after the t/o and, ignoring the cash payment, so have put in an incorrect figure

"As long as they know what your holdings are, the cost base is irrelevant, since it will reset to market value on inheritance. Every cloud.....""

True. On the other hand, I may go completely ga-ga before than (well on the way already) and as Powers of Attorney they may have to operate my portfolios for me and in the meantime, I have to do these wretched returns myself so need to get the facts right so all help in doing so greatly appreciated.

Gengulphus
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Re: cgt position when takeovers are for cash and shares and one held shares in both companies

#24320

Postby Gengulphus » January 19th, 2017, 6:24 am

Bouleversee wrote:Well, I'm only talking about the book cost of the holding in that portfolio, which contained both the BG shares and the RDSB shares and they received the cash, so I don't see why it should be so difficult. They have altered the book cost of the RDSB shares after the t/o and, ignoring the cash payment, so have put in an incorrect figure

But even before the takeover, they didn't know what your CGT base cost was on your shares. They knew e.g. that the 539 BG shares you had with them had been bought for £7,146.99, but they didn't know what other holdings of BG shares you might own - if e.g. you had one other BG holding of RDSB, of 539 shares bought for £5,146.99, then your CGT base cost for your 1078 BG shares would have been £7,146.99 + £5,146.99 = £12,293.98, and your CGT base cost for the 539 shares held with them would be half of that, i.e. £6,146.99.

And after the takeover, if you'd had that other holding, your cash receipts from the takeover would have been twice what they actually were, i.e. £4,128.74. That would have been under neither £3k nor under 5% of the value of the BG shares just before the takeover, so you would not have been able to use the "small capital distribution" treatment of the cash received. You'd have had to use the standard apportionment treatment - and that would have made the CGT base cost something other than (cost of BG shares) + (cost of RDSB shares) - (cash received).

And in fact, as things stand without any other holding, the fact that you received less than £3k cash only means that you are allowed to use the "small capital distribution" treatment, not that you are obliged to. You could instead use the standard apportionment treatment if you preferred - and there are circumstances in which a shareholder will prefer to because it will realise a substantial capital gain or loss, and they want either to realise gains to make better use of their CGT allowance or losses to offset gains in excess of their CGT allowance. So even if the broker only supplies on-condition-that-this-is-your-only-holding CGT base costs, there are two possible answers for the post-takeover CGT base cost and they don't know which it is. (Indeed, not even the shareholder necessarily knows which it is! That's because they only have to decide which treatment to go for when they submit the relevant tax return, not at the time of the takeover, and which is the sensible treatment to go for may depend on subsequent events in the tax year.)

Basically, the CGT system is such that brokers cannot guarantee to provide correct CGT calculations for their clients - just very basic amounts of cash / numbers of shares / dates information about purchases, sales and corporate actions. I see every reason to be annoyed about that inability - but the annoyance should really be aimed at those responsible for that situation: governments and legislators, not brokers!

Gengulphus

Bouleversee
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Re: cgt position when takeovers are for cash and shares and one held shares in both companies

#31436

Postby Bouleversee » February 14th, 2017, 11:01 am

gengulphus -

I see that there is no reply from me to your post of January 19; either that was remiss of me or another case of my post getting lost in the system. Anyway, you make some good and helpful points as usual so thanks. I am about to apply my degenerating brain to the cgt situation re the takeover of BPI by RPC in the current tax year which looks to be more complicated. I may need help again.


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