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Capital Gains Tax -Capital Distribution

Practical Issues
jaizan
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Capital Gains Tax -Capital Distribution

#209231

Postby jaizan » March 21st, 2019, 8:55 pm

If I have a share holding and the company makes 2 capital distributions in earlier tax years, then I dispose of the remaining holding in the current tax year, presumably all the capital gain should be counted in the current year ?

Hypothetically:

Purchase cost 10,000 shares @ £1 = £10,000
Capital distribution in 2016-17 = £5000
Capital distribution in 2017-18 =£5000
Sold 10,000 shares in 2018-19 for £1000.
Capital gain presumably = £1000, all attributable to 2018-19 tax year as it's impossible to identify if a gain has been made before this point ?

[And no I am not going to pay a tax expert, since the amount is small and my objective is to work out how much other stuff I can sell and be below this years CGT allowance]

pochisoldi
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Re: Capital Gains Tax -Capital Distribution

#209236

Postby pochisoldi » March 21st, 2019, 9:02 pm

jaizan wrote:If I have a share holding and the company makes 2 capital distributions in earlier tax years, then I dispose of the remaining holding in the current tax year, presumably all the capital gain should be counted in the current year ?

Hypothetically:

Purchase cost 10,000 shares @ £1 = £10,000
Capital distribution in 2016-17 = £5000
Capital distribution in 2017-18 =£5000
Sold 10,000 shares in 2018-19 for £1000.
Capital gain presumably = £1000, all attributable to 2018-19 tax year as it's impossible to identify if a gain has been made before this point ?

[And no I am not going to pay a tax expert, since the amount is small and my objective is to work out how much other stuff I can sell and be below this years CGT allowance]


Assuming that you are not treating the capital distribution as a part disposal...

Looks right to me - you reduce the base cost by the amount of the distribution until your cost goes down to zero.
Any further capital distribution after base cost reduces to zero is a pure capital gain. (doesn't apply in your scenario)
Any sale after the base cost is a capital gain after allowing the costs of the sale.

So to use your example if "Sold 10,000 shares in 2018-19 for £1000" actually means "Sold 10,000 shares in 2018-19 for £1000 with £50 in brokers fees" then your final capital gain is £1000 - £50 = £950.

PinkDalek
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Re: Capital Gains Tax -Capital Distribution

#209253

Postby PinkDalek » March 21st, 2019, 10:33 pm

pochisoldi wrote:
jaizan wrote:If I have a share holding and the company makes 2 capital distributions in earlier tax years, then I dispose of the remaining holding in the current tax year, presumably all the capital gain should be counted in the current year ?

Hypothetically:

Purchase cost 10,000 shares @ £1 = £10,000
Capital distribution in 2016-17 = £5000
Capital distribution in 2017-18 =£5000
Sold 10,000 shares in 2018-19 for £1000.
Capital gain presumably = £1000, all attributable to 2018-19 tax year as it's impossible to identify if a gain has been made before this point ?

[And no I am not going to pay a tax expert, since the amount is small and my objective is to work out how much other stuff I can sell and be below this years CGT allowance]


Assuming that you are not treating the capital distribution as a part disposal...

Looks right to me - you reduce the base cost by the amount of the distribution until your cost goes down to zero. ...


I know of no basis that permits you not to have treated them as part disposals (those distributions would not appear to qualify as small cash receipts).

Shouldn’t the OP calculate the gain each tax year using the standard part disposal formula?:

https://www.gov.uk/hmrc-internal-manual ... al/cg12731

Thus the brought forward s104 pool would be much lower than the original £10,000 but 2018-19 would probably result in a capital loss. The OP would also need to check any Tax Returns for the prior 2 years have been correctly completed, as applicable.

Always assuming these are definitely capital distributions. Perhaps the OP could name the company if publicly quoted.

Edit: This must be the subject of your earlier Vinaland topic. I haven’t read it again but it is here:

viewtopic.php?f=49&t=14435&p=176607#p176607

PinkDalek
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Re: Capital Gains Tax -Capital Distribution

#209257

Postby PinkDalek » March 21st, 2019, 10:51 pm

Having read the original Topic, I'll ask if the two relevant threads can be merged, as otherwise we are going over old ground. See, in particular, strophe's response which you may have missed.

jaizan
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Re: Capital Gains Tax -Capital Distribution

#209680

Postby jaizan » March 23rd, 2019, 9:39 pm

This is a different question to the previous one, so not old ground.

1 Previous question was related to whether or not it is a capital distribution. That one is confirmed.

2 Current question is related to the capital gains taxation when disposing of them (having confirmed it is a capital distribution).

Note: Whatever happens, I shall ensure my capital gains remains within the annual allowance, although I intend to get as near as possible to the limit each year.


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