Lootman wrote:Gengulphus wrote: A negligible value claim is simply a device to speed that up, basically producing the same effect as you would get by transferring them to a new owner without quite a few of the complications - essentially you and the taxman agreeing (assuming the taxman accepts the claim) to pretend that you have transferred them to a new owner. So if (and for as long as) you don't want to speed it up, don't submit a negligible value claim.
I agree with the advice there if the investor wants to delay taking the tax loss.
Which in the context of the quote that precedes that remark where I made it, the investor concerned (absolutezero) does, or at the very least is not at all averse to delaying taking it.
Lootman wrote:But if you wish to accelerate the loss then selling a near worthless share for a peppercorn price in order to crystallise a loss is a fairly standard thing, and I have employed that myself a couple of times. I do not see that there is any "pretending" going on there. You merely have to be able to demonstrate that the holding is near worthless which, in this sad case, it fairly clearly is. And that you transferred the beneficial ownership of that asset.
Agreed that there is no "pretending" involved in selling for a peppercorn price to crystallise a loss. Nor is there any actual "pretending" involved in making a negligible value claim, as long as you honestly believe the shares to be of negligible value: the "pretending" only happens later, if and when the taxman accepts the claim. I.e. basically, by the time it starts, it's by mutual agreement between you and the taxman - and furthermore, it's a pretence that is allowed by tax law. So "pretending" is not a problem with either course of action.
Selling for a peppercorn price does have the apparent advantage that it's certain to work, while a negligible value claim has the risk that the taxman might not accept the claim. I'm pretty certain that risk is zero in the case of Carillion, but suppose just for the sake of argument that I'm wrong, i.e. that the taxman somehow believes the market value of Carillion shares is currently non-negligible and so rejects the claim. In that case, he will clearly also believe that the peppercorn price is not the market value of the shares sold - which is relevant because of the market value rule for CGT: if a sale is made to a "connected person" (close relative, business partner, etc) or it is made other than by a normal "at arm's length" commercial bargain, it is deemed to have happened at market value regardless of the price actually paid. So if one wants to go the sell-at-peppercorn-price route, one needs to find a buyer who is not a "connected person" and a method of selling that does result in a normal "at arm's length" commercial bargain to be safe against the taxman reckoning Carillion shares have a non-negligible market value.
So for anyone who reckons that they can do that for Carillion shares, despite the obvious fact that the standard way to achieve a normal "at arm's length" commercial bargain simply isn't available at present, and who is willing to back their own judgement on the matter, the sell-at-peppercorn-price route doesn't share the taxman-thinks-value-non-negligible risk of the negligible-value-claim route. If they choose the sell-at-peppercorn-price route as a result, well, I can't say that they're wrong but neither can I say that they're right - so all I can do is wish them good luck!
For anyone else, the two routes share that risk.
I can also see two other practical issues:
* The sell-at-peppercorn-price route requires the sale to have been agreed by (at the latest) April 5th this year if it's to realise the loss for the 2017/2018 tax year - so it's fairly urgent for them to find a suitable buyer and method of selling. The negligible-value-claim route's timing is much more relaxed: if one wants it to realise the loss for the 2017/2018 tax year, it's easy up to 31/01/2019 (the deadline for submitting one's tax return for 2017/2018), not much more difficult up to 31/01/2020 (the deadline for amending one's tax return for 2017/2018), and doesn't become impossible until 06/04/2020 (when the 2020/2021 tax year starts and it ceases to be possible to make negligible value claims for dates in the 2017/2018 tax year).
* Davidsb reported earlier in this thread that Selftrade have told him that they cannot actually transfer Carillion shares. If that is a general problem with share transfers actually not being possible at all, that does raise the question of whether a sale that is never settled (i.e. shares and cash actually changing hands) counts as a disposal for CGT purposes. I know the answer if (as is normal) settlement happens on a later date than the trade is agreed: it does count as a disposal, on the date that the trade was agreed. But I simply don't know the answer if settlement never happens - a possible issue for the sell-at-peppercorn-price route, but not for the negligible-value-claim route.
Finally, just to be clear, I'm not saying the sell-at-peppercorn-price route is definitely wrong, just that like the negligible-value-claim route, it has issues. It is of course clear which one I favour, but as long as the two routes' various issues have been discussed and people are in a position to make up their own minds about them, I am basically content.
Gengulphus
