Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

CGT

Practical Issues
MickR
2 Lemon pips
Posts: 130
Joined: July 29th, 2019, 5:40 pm
Has thanked: 147 times
Been thanked: 31 times

CGT

#391464

Postby MickR » March 2nd, 2021, 11:43 am

Hi

apologies if these have already been covered in previous discussion, but I have a few questions about CGT and it was getting painful searching through all of the responses, so, can someone clarify the following

- Can I pull forward CGT losses from last year, even if I didn't declare the loss?

- Can I include account fees as a loss? would I include a £100 "reward" I received for transferring from another provider?

- how do you calculate a gain if I buy 10 shares in a ETF say at £10, then a further 6 two months later at £15, but then sell 8 later on at £20? can I chose which ones to take into consideration?

thanks

Mick

bluedonkey
Lemon Quarter
Posts: 1791
Joined: November 13th, 2016, 3:41 pm
Has thanked: 1394 times
Been thanked: 652 times

Re: CGT

#391470

Postby bluedonkey » March 2nd, 2021, 11:51 am

I'll just answer the third of your queries.

10 at £10 = £100 pool c/fwd
6 at £15 = £90 + £100 b/fwd = pool of £190 for 16 shares

Sell 8, cost = £190/16 x 8 = £95
C/fwd remaining 8 at pool value of £95

genou
Lemon Quarter
Posts: 1070
Joined: November 4th, 2016, 1:12 pm
Has thanked: 177 times
Been thanked: 370 times

Re: CGT

#391475

Postby genou » March 2nd, 2021, 11:59 am

MickR wrote:Hi

apologies if these have already been covered in previous discussion, but I have a few questions about CGT and it was getting painful searching through all of the responses, so, can someone clarify the following

- Can I pull forward CGT losses from last year, even if I didn't declare the loss?


Yes, Current time limit is that you have 4 years to claim a loss.
MickR wrote:
- Can I include account fees as a loss? would I include a £100 "reward" I received for transferring from another provider?

No and no.

MickR
2 Lemon pips
Posts: 130
Joined: July 29th, 2019, 5:40 pm
Has thanked: 147 times
Been thanked: 31 times

Re: CGT

#391476

Postby MickR » March 2nd, 2021, 12:01 pm

fantastic thanks both

Gengulphus
Lemon Quarter
Posts: 4255
Joined: November 4th, 2016, 1:17 am
Been thanked: 2628 times

Re: CGT

#391711

Postby Gengulphus » March 3rd, 2021, 12:03 am

MickR wrote:... can someone clarify the following

- Can I pull forward CGT losses from last year, even if I didn't declare the loss?

Depends:

* If you realised more gains than losses last year, no: the losses had to be used up against the same-year gains - even if those gains were below the CGT allowance.

* If you realised more losses than gains last year, the losses had to be used as far as possible against the same-year gains, but losses beyond that can be carried forward. So you can carry the amount of the losses you realised last year minus the amount of the gains you realised last year forward.

In particular, the only way you can carry all the losses you realised last year forward is if you didn't realise any gains last year.

There is also potentially an issue about why you didn't declare the losses last year. The easiest cases are if you didn't have to submit a tax return last year, or if you did have to submit one but didn't have to fill in its capital gains section. In that case, hopefully none of the reasons why you should have filled in the capital gains section (*) applies to you except possibly "you want to claim an allowable capital loss or make a capital gains claim or election for the year" (not having filled it in is easily explainable in that case: you presumably didn't realise that you wanted to claim the capital losses). Otherwise, there might be a problem with last year's return not having been "correct and complete to the best of my knowledge and belief" as stated in the declaration at its end - which I mention because if there was a mistake in that respect, being open about it from the start is probably a good idea.

(*) They're documented on page TRG4 of https://assets.publishing.service.gov.u ... 0_2019.pdf (for the 2018/2019 tax year) or https://assets.publishing.service.gov.u ... _Notes.pdf (for the 2019/2020 tax year).

Edit: The above answer is specific to the undeclared losses having been realised last year. If they were realised earlier, then what it says only applies to the first year they are carried forward. Once they have been carried forward, they become 'brought-forward' losses rather than 'same-year' losses, and you're only obliged to use brought-forward losses if your gains are still above the CGT allowance after offsetting same-year losses, and only to the extent required to get them down to the CGT allowance. I.e. the bit about having to use losses against gains even if the gains are already below the CGT allowance only applies to same-year losses, not to brought-forward losses.

MickR wrote:- Can I include account fees as a loss? ...

No. The gain or loss you realise on disposing of shares (or indeed any other asset that is subject to CGT) is the 'disposal proceeds' (the basic amount you're paid for it, before any deductions - so for a shareholding disposed of by a straightforward sale (**), it's the number of shares sold times the share price at which the sale took place) minus the 'allowable costs' (aka 'allowable expenditure'). According to CGT manual page CG15160:

Except where there is specific provision to the contrary, allowable expenditure is restricted to sums for

* acquiring the asset
* creating the asset
* enhancing its value
* establishing, preserving or defending title to or rights over the asset
* incidental costs of acquisition and disposal.

and some important passages from following pages are (CG15161):

If the disposer acquired the asset this is consideration which was given wholly and exclusively for the acquisition of the asset plus the incidental costs of acquisition.

and (CG15250):

TCGA92/S38 defines the incidental costs of acquisition and disposal. The definition is exhaustive. No other expenditure is allowable unless specifically provided for by TCGA92 (see, for example, TCGA92/s143(6) (see CG56084).

If a disposal by a company (Company A) is deemed to have been made by another company (Company B) following an election under TCGA92/S171A (CG45355), incidental costs of disposal incurred by Company A which would have been allowable if the gain had been chargeable on Company A can be allowed in the computation of the gain chargeable on Company B.

Allowable incidental costs are limited to

* fees, commission or remuneration paid for the professional services of any
- surveyor, valuer or auctioneer
- accountant or agent
- legal adviser

* costs of transfer or conveyance (including Stamp Duty or stamp duty land tax)

* costs of advertising to find a buyer or seller

* costs reasonably incurred in making any valuation or apportionment required for the purposes of the Capital Gains Tax computation.

The expenditure must have been incurred wholly and exclusively for the purposes of the acquisition or disposal.

The crucial words in those quotes for your question are "wholly and exclusively". An account fee is not paid wholly and exclusively for any particular acquisition or disposal, but for the general service the broker provides to you of doing all the acquisitions and disposals you choose to do with the broker, and of providing you with account statements, etc. So it isn't an allowable cost for CGT.

I should also mention the relevant CGT manual contents page for links to a lot more information about what is and isn't 'allowable costs', and in view of a pedantic point I've noticed, I should point out (CG155) "No item of expenditure can be deducted for Capital Gains purposes more than once from any sum or from more than one sum." The pedantic point is that the above quotes apparently say that you can include the incidental costs of acquisition (which for shares are normally broker commission, stamp duty and PTM levy if the purchase is big enough) both in the "acquiring the asset" category and in the "incidental costs of acquisition and disposal" category - but you can only include them in one of those categories because of this rule.

(**) There are special rules for other types of disposal, such as giving the shares to someone else rather than selling them.

MickR wrote:... would I include a £100 "reward" I received for transferring from another provider?

My belief is that such "rewards" are promotional gifts by the account provider to you, and not taxable - but I must admit that I'm by no means certain about that answer.

MickR wrote: - how do you calculate a gain if I buy 10 shares in a ETF say at £10, then a further 6 two months later at £15, but then sell 8 later on at £20? can I chose which ones to take into consideration?

Assuming we're not talking about something that happened in the 2007/2008 tax year or before (*) and also that the second purchase and the sale don't happen on the same day (which seems likely, but you haven't actually said it), the calculation goes:

Starting point: I assume you had no shares in the ETF to start with, meaning you have a 'pool' of 0 shares acquired for £0, with £0 incidental costs.

First purchase: Buy 10 shares for £100 plus incidental costs of say £2 commission plus 50p stamp duty. You now have a 'pool' of 10 shares with acquisition costs of £100 and incidental costs of acquisition £2.50.

Second purchase: Buy 6 shares for £90 plus incidental costs of say £2 commission plus 45p stamp duty. You now have a 'pool' of 16 shares with acquisition costs of £190 and incidental costs of acquisition £4.95.

Sale: you sell 8 shares, which is half of your 'pool' of shares. You apportion the 'pool' accordingly: each half contains 8 shares with acquisition costs of £95, and one half has incidental costs of acquisition £2.47 and the other half £2.48 (**). Your sale has proceeds of £160, with commssion of maybe £8. So the calculation of the gain is (proceeds) - ((acquisition costs) + (incidental costs of acquisition) + (incidental costs of disposal)) = £160 - (£95 + £8 + £2.48) = £54.52 and you're left with a pool of 8 shares with acquisition costs of £95 and incidental costs of acquisition £2.47 to carry forward (or you might prefer to swap around the £2.47 and £2.48, or even round them both to £2.48).

Things get more complicated if you have two or more trades in the same share on the same day, or if you sell a type of share and then buy it in any of the following 30 days. If either of those applies to any of your CGT calculations, ask about the 'same-day' and '30-day' rules.

(*) Different CGT rules applied to those tax years - and by the way, it is possible to find oneself having to perform CGT calculations for that far back without ever having broken any tax rules. Specifically, it could happen that someone sold some shares back them but completely obviously didn't have to report the sales for CGT (e.g. because their total disposal proceeds were below the CGT allowance) - but now has to do the CGT calculations for the sales back then to establish the starting point for the CGT calculations for a recent sale.

(**) Note that I definitely don't expect the taxman to be nitpicky about single penny differences, nor even about single pound differences - it simply wouldn't be worth his while! (On the other hand, I am personally nitpicky about them, because it's far easier to have my spreadsheets simply flag up cases where two quantities that should be equal aren't than to try to work out how big a difference is just acceptable rounding errors, rather than a significant mistake.)

Gengulphus


Return to “Taxes (Practical)”

Who is online

Users browsing this forum: No registered users and 6 guests