Capital Gains Tax on very old shares

[Raasu]

I've recently been applying to take Power of Attorney over my mother's investments, because her memory is fading and she feels she can't handle the paperwork any more, especially as most brokers aren't using paper any more and she's never been able to use the Internet.

She has some old paper certificate shares that she bought in Guinness PLC (now Diageo) in 1987 - these are worth about £37k now. She also has paper share certificates in BP (now worth about £8k) which she inherited in 1993.

I think from looking at the old certificates that she has not added to her original holdings in these over the last 40 years (i.e. dividends were paid out and not reinvested). But I can't be sure and it's difficult as both companies have issue share splits and consolidations in that time, the holdings changed. And Guinness merged with Diageo over 20 years ago. She hasn't kept all the paperwork covering the whole period.

Also in 1993 she inherited (or was given, she can't remember any more) from her father quite a big tranche of shares in a Dutch investment trust called Robeco Global All Star Equities which is currently held via a brokerage in a Swiss bank. It might sound suspicious but she's always declared the dividends as foreign earnings. Over time those shares has moved from one brokerage to another, and again the old paperwork has gone now. At the moment the dividends are paid into her UK bank account and charges are paid by the company selling a small number of shares every year.

We both want to simplify her investments and I'd like to sell some to put into an ISA, but if I sell in this tax year, the problem is calculating capital gains tax. With such old shares, the capital gain could be quite substantial - e.g. Diageo is currently priced around 3060p but back in 1994 it was 450p. But Guiness merged with Diageo in 1997 - what happens to CGT on Guinness shares in a merger? Plus the BP and Guiness/Diageo shares have been through various conversions and subdivisions of shares where the price and holdings changed.

I really don't know where to start with this. Has anyone got any advice? I'm not sure if an accountant or tax adviser could help, if we don't have paperwork going all the way back. Is there anything that HMRC can do in this kind of situation? I should say that we're both resident in the UK.

Thanks for your advice

[doug2500]

The only part I can directly answer is that nothing happens to your shares on a merger - they just continue with the same base cost. As long as nothing else happened at the same time like a return of capital, or demerger of part of the business.

When I was faced with the same problem I traced some holdings history by using tax returns which stated the number of shares held every year. This helped me work out if any changes might have occurred e.g. purchase or sale. Some companies have very good websites detailing all the changes, corporate actions and historic prices. But you need something to go on to start from, either a purchase date or price.

Ultimately for most holdings I resorted to selling bits off below the CGT threshold every year and moving it into ISA's. At 11K or so a year it takes a while. And you live in fear of a forced action like a takeover occurring. Less likely with the big names you've mentioned.

[supremetwo]

The only part I can directly answer is that nothing happens to your shares on a merger - they just continue with the same base cost. As long as nothing else happened at the same time like a return of capital, or demerger of part of the business.

When I was faced with the same problem I traced some holdings history by using tax returns which stated the number of shares held every year. This helped me work out if any changes might have occurred e.g. purchase or sale. Some companies have very good websites detailing all the changes, corporate actions and historic prices. But you need something to go on to start from, either a purchase date or price.

Ultimately for most holdings I resorted to selling bits off below the CGT threshold every year and moving it into ISA's. At 11K or so a year it takes a while. And you live in fear of a forced action like a takeover occurring. Less likely with the big names you've mentioned.

Echo the below CGT threshold disposal.

Also if you open a dealing account with the same provider as the ISA, then send off the certificates to that and you will have the ability to Bed and ISA (up to the iSA limit currently £20k) with a small saving in costs.

Robeco Global All Star Equities may well be more difficult.

Is there anything that HMRC can do in this kind of situation?

The answer to that is no. The only definite is that they will check your calculations.

She also has paper share certificates in BP (now worth about £8k) which she inherited in 1993.
The base cost for inherited shares will always be the date of death value.
https://www.gov.uk/hmrc-internal-manual ... /ihtm18093
The value used for most CGT purposes is the figure one-half of the way up from the lowest to the highest closing prices of the day

[scrumpyjack]

You could contact the Diageo Company Secretary and explain the problem. They should be able to tell you how many shares should currently be held for a holding of X shares in 1987 and whether any forced disposals would have occurred due to capital returns and the like.

I would be surprised if new share certificates had not been issued over that period in view of the various corporate actions that have occurred. The current number of shares held will be shown on the dividend payments and may well not be for the same number of shares .

You will need a valid current share certificate to sell them. The Company Secretary should be able to tell you whether your old certificate is still valid.

Ultimately when they are sold you will need to make your best estimate in the tax return of cost and gain, unless total gains are less than the annual limit and proceeds less than 4 x that. In that case the CGT pages do not need to be completed.

[Raasu]

Thanks for your advice everyone.

In the case of Robeco I have got hold of the price history going back to 1993. During that time the price changed once when the Euro came in/ The shares which were originally valued in Dutch Guilders were changed to being Euros. So how do I work out what the Euro-demoninated purchase price is, when the Euro didn't exist when the shares were purchased!?

Also in 2001 there was a 4-for-1 split in the shares (so the holding multiplied by 4, and the price went down to a quarter of what it was). I'm not clear on what do about this. If I want to work out the capital gain when I sell some shares now, do I just divide the original purchase price by 4?

Thanks again

[Alaric]

So how do I work out what the Euro-demoninated purchase price is, when the Euro didn't exist when the shares were purchased!?

There was a fixed conversion rate for all the currencies that merged into the Euro.

https://en.wikipedia.org/wiki/Dutch_guilder

The exact exchange rate, still relevant for old contracts and for exchange of the old currency for euros at the central bank, is 2.20371 Dutch guilders (NLG) for 1 euro (EUR).[2] Inverted, this gives EUR 0.453780 for NLG 1.

For a UK resident liable to UK CGT, surely what you need is the base cost in UK pounds with the gain being the difference between that and the selling proceeds, also in UK pounds?

If you've held them that long, the CGT rebase as of 3st March 1982 might be relevant.

[dealtn]

Thanks for your advice everyone.

In the case of Robeco I have got hold of the price history going back to 1993. During that time the price changed once when the Euro came in/ The shares which were originally valued in Dutch Guilders were changed to being Euros. So how do I work out what the Euro-demoninated purchase price is, when the Euro didn't exist when the shares were purchased!?

Also in 2001 there was a 4-for-1 split in the shares (so the holding multiplied by 4, and the price went down to a quarter of what it was). I'm not clear on what do about this. If I want to work out the capital gain when I sell some shares now, do I just divide the original purchase price by 4?

Thanks again

2.20371 was the exchange rate for NLG to Euro on inception. You would also need to convert both initial and disposal into GBP when calculating your gain though.

Yes you would be owning 4 times the number of shares, but at quarter the value. So in your calculation either multiply the current price by 4 and divide the number of shares by 4 to reverse, or perhaps more simply use the aggregate total as a means of calculating the gain. It is the gain that is important, not on a per share basis. So if the initial investment was £10,000 and is now £50,000, you have "gained" £40,000. It is irrelevant if that was originally 5,000 shares at NLG4 and is now 20,000 shares at EUR2.5 (or whatever).

[PinkDalek]

In the case of Robeco I have got hold of the price history going back to 1993. During that time the price changed once when the Euro came in/ The shares which were originally valued in Dutch Guilders were changed to being Euros. So how do I work out what the Euro-demoninated purchase price is, when the Euro didn't exist when the shares were purchased!?

I've no idea if this assists but according to https://ec.europa.eu/info/business-economy-euro/euro-area/euro/eu-countries-and-euro/netherlands-and-euro_pt you could use the Fixed conversion rate €1 = 2.20371 NLG wef 1 January 1999.

Earlier you named the fund as Robeco Global All Star Equities. I've failed to find that precise name here https://www.robeco.com/uk/funds/ so do you know the current name and is there anything on that website which takes you further?

They may even hold some historical price information if you are able to contact Robeco, perhaps starting in the UK here https://www.robeco.com/uk/about-us/contact/.

Also in 2001 there was a 4-for-1 split in the shares (so the holding multiplied by 4, and the price went down to a quarter of what it was). I'm not clear on what do about this. If I want to work out the capital gain when I sell some shares now, do I just divide the original purchase price by 4?

That might be correct but earlier you were unsure if the acquisition was an inheritance or gift in 1993. Above you say original purchase price but what do you mean by original purchase and when are you taking that from?

Overall, without accurate CGT base costs you may need to spread the disposals/bed and ISAing of all the assets over a number of years. Keeping entirely within the CGT annual exempt amount, which is currently £12,000 for 2019-20. Starting first with BP and part of Diageo.

Further, we don't know enough about your Mothers' other income to confirm putting the holdings into an ISA would be beneficial. Are you sure on this front?

Edit: I now see you've already had replies on the exchange rate but the mention of 31 March 1982 would appear to be a red herring as the reported acquisitions/gifts were in 1993 and what is now Diageo was acquired in 1987. You do say over the last 40 years but was that merely a slight miscalculation?

[Raasu]

Thanks PinkDalek - I'm back on this forum again, it was out of action for me yesterday.

The Robeco fund ISIN is on the statement: NL0000289783 which is Robeco Sustainable Global Stars Equities Fund Class A. There is info on the web site including a price history, which is very useful. So if I use the fixed conversion rate for the Euro then I can calculate what the base price was, assuming that all the shares / units have been held since my mother got them. I am pretty sure she inherited them and so then I know the date that her father died, she would have become the owner fairly soon after that (probate took some time to complete I remember). At least I know she didn't purchase them herself. If she inherited them, can I take the base price for CGT as what was the price at the point? I will contact the bank in Switzerland to see how far back they give me statements or transaction details.

For Diageo I've dug out what old paperwork I can . I can see two purchases in 1987 totalling 630 Guinness shares. Then there's a certificate from 1991 showing 1260 shares in Guinness. 1260 is twice 630 so I presume there was a 2-for-1 split somewhere in between. Then i can see a certificate for 1260 shares in Diageo in Feb 1998. And she has 1209 Diageo shares now. In August 1998 there was a share conversion in Diageo of B shares into ordinary shares - her B shares became 121 ordinary shares.

With BP she's sure she inherited the holding in 1993. I've found a certificate from October 1999 saying she held 1800 shares, and a letter from October 1999 about a 2-for-1 subdivision of BP shares, so I guess she had 900 shares before that. She still has 1800 shares now. If she has held all that tranche of BP shares since she inherited them, again can I take the base price for CGT to be the price when she inherited them?

Is there a particular department that I can contact in HMRC to ask about the base price of the Robeco units, and how to convert the Guilders price to Euros?

[Raasu]

Correction: With Diageo in fact I found out there was a reorganisation and conversion of shares in February 1998. Her holding of 1260 Diageo in late January 1998 became 1209 shares in February (I've got two share certificates from Feb, one of 1088 and one of 121). So in fact I can now trace it all the way back the original purchase of 630 Guinness shares in 1987, which became 1260 shares in 1991, which later became 1260 Diageo shares and that became 1209 Diageo shares in 1998, and now she still has 1209 Diageo shares. So I think I can take it that no purchases or sales have been made during that whole time.

[yorkshirelad1]

Other have posted helpful info, and I can't add very much.

One useful thing (that I've done when I've been in this situation) is to track the dividend history (assuming dividends were paid/received). They're usually regular/periodic, and there's usually some evidence that they've been received (personal bank statements / broker statements / tax & dividend vouchers ) depending on how much/how far paperwork you have available. It can be a bit tedious, but if you can put the jigsaw together, it'll give you a history of the holdings (number of shares held, name of holding etc etc).