Capita rights issue: lapsed rights: re-apportionment

[yorkshirelad1]

Can anyone advise of the base cost re-apportionment (percentage of existing base cost to rights) and sale price of lapsed rights for the Capita rights issue April/May/June 2018. There's not much obvious on their website https://investors.capita.com/rights-issue

I've received proceeds of some lapsed rights (not a trival amount so can't just deduct it from the base cost) of a holding in Capita, and am trying to work out the loss.

TIA

Allan

[PinkDalek]

I know you say not trivial but, for the avoidance of doubt, are the proceeds £3,000 or less or 5 per cent or less of the value of the shares at the date of the distribution. See https://www.gov.uk/hmrc-internal-manual ... al/cg57835 onwards.

As you say, there appears to be nothing specific on the subject at the Capita website but I'm not sure there should be. Don't you need to follow the standard A/A+B calculations? Where A is the proceeds and B is the ex rights price x your shareholding. You need to find B then follow the methodology as outlined here:

https://www.gov.uk/hmrc-internal-manual ... al/cg57857

You may get an idea of the ex-rights price from below but this would surely be something known to Capita, if you call the relevant person:

https://www.londonstockexchange.com/exc ... XSTMM.html

The paperwork I saw just now suggested the ex right date was 10 May 2018. I don't therefore follow your April/May/June 2018.

[yorkshirelad1]

I know you say not trivial but, for the avoidance of doubt, are the proceeds £3,000 or less or 5 per cent or less of the value of the shares at the date of the distribution. See https://www.gov.uk/hmrc-internal-manual ... al/cg57835 onwards.

As you say, there appears to be nothing specific on the subject at the Capita website but I'm not sure there should be. Don't you need to follow the standard A/A+B calculations? Where A is the proceeds and B is the ex rights price x your shareholding. You need to find B then follow the methodology as outlined here:

https://www.gov.uk/hmrc-internal-manual ... al/cg57857

You may get an idea of the ex-rights price from below but this would surely be something known to Capita, if you call the relevant person:

https://www.londonstockexchange.com/exc ... XSTMM.html

The paperwork I saw just now suggested the ex right date was 10 May 2018. I don't therefore follow your April/May/June 2018.

Thanks very much for your thoughts

1. The proceeds of the lapsed rights were more than £3,000
2. It's not obligatory for Capita to post details of the cost reapportionment, but many companies who carry out rights issues will later on publish the relevant information for CGT purposes.
3. Re dates: I would agree with your comment, but I was trying to cover the range of time from when the rights issues was announced through to when the proceeds were received

[Lootman]

There is a way of handling things like lapsed rights issues without having to worry about pro-rating the original cost basis.

What you can do instead is create a separate standalone position line item for the rights issue. It is, after all, a separate and distinct security. You then treat it like a purchase and sale. The cost basis for the "purchase" is zero (nil paid rights). The proceeds is whatever you were paid when the rights lapsed. That's what you'd do anyway if you sold the rights rather than letting them lapse.

Then you can either declare that gain in the current year's tax return. Or roll forward that position to future years under the small distribution rules, as mentioned, if you can. If deferred, you declare the gain on the rights in the same tax year as when you dispose of the original position.

Either way the cost basis for the original position remains unchanged because you are accounting for it elsewhere. Although the rules say that you are supposed to reduce the cost basis of the original position, my method gives the exact same result and has always been accepted both by my accountant and by HMRC. And avoids the possible situation where the cost basis falls below zero.

[PinkDalek]

Thanks very much for your thoughts
a. The proceeds of the lapsed rights were more than £3,000

Understood and presumably the proceeds were not 5 per cent or less of the value of the shares at the date of the distribution (which I now see from the pdf below appears to be the case).

b. It's not obligatory for Capita to post details of the cost reapportionment, but many companies who carry out rights issues will later on publish the relevant information for CGT purposes.

I've been having a senior moment or two on this since your reply, especially as I've had no rights issues on my holdings for many a year. I do know that the relevant A/A+B information is often published on a Return of Capital and Share Consolidation, such as here https://landsec.com/sites/default/files ... xample.pdf, but am unsure re rights issues.

Having said that, I've now found this in Capita's Rights issue section of their website (I hope you can access it):

https://investors.capita.com/rights-issue >>>
https://investors.capita.com/~/media/Fi ... m-8397.pdf

That pdf is dated 21 June 2018 and appears to have been issued for US Internal Revenue Code purposes but does include detail of how one should allocate if subjected to USA taxes. Lootman may be able to confirm if their allocation basis would be the same as ours.

The pdf also includes both a telephone number and email address of the UK Investor Relations contact who should be able to assist you which is also here:

https://investors.capita.com/investor-contacts

[yorkshirelad1]

Thanks v much for the update/follow-up. Yes I did see that info too (the US IRS form). I also spoke to a broker and there was a slight difference in one party seemed to have used average price through the day and another used end of day prices to calculate the relevant ratio for apportioning base cost.

I also had some useful contact by e-mail with Capita Inv Relations (IR)

FWIW, I tried the phone number listed on the various releases on the rights issue page for IR at Capita and they seemed always engaged (ringing from a BT line and an EE mobile: I tried both) but I got contact via e-mail anyway (and advised them of the phone number appearing to be engaged).