CGT Payments

[XFool]

Does anyone know how CGT 'works', when it comes to HMRC?

Unusually, for my online 2021 SA Tax Return I reported on CGT. I quickly gave up on trying to use the SA CGT pages - situation too fraught with complexity and uncertainty. So I prepared a spread sheet for my calculations and an accompanying set of notes explaining the position in each case. Turned them into two pdf documents and attached them to my online SA return - thus dumping the whole thing onto HMRC.

The income tax return went through OK (only in January) and ended up with a surplus in my favour sitting in my tax account. I haven't heard a dicky-bird about the CGT issues since.

What normally happens with CGT? Is it just a matter of being patient?

TIA

[Alaric]

Turned them into two pdf documents and attached them to my online SA return - thus dumping the whole thing onto HMRC.

The income tax return went through OK (only in January) and ended up with a surplus in my favour sitting in my tax account. I haven't heard a dicky-bird about the CGT issues since.

What normally happens with CGT? Is it just a matter of being patient?

Was there anything to pay? If so, wouldn't you have been expected to pay it by January 31st?
For many years I've kept net disposals below the annual allowance, so had nothing payable. When gross disposals are above the allowance or proceeds are more than four times the allowance, you are required to report them even when no tax is payable.

[XFool]

Was there anything to pay?

I have absolutely no idea. Which is rather the point.

[Alaric]

I have absolutely no idea. Which is rather the point.

I would expect it follows the usual rules. If you submit a return by 30th September, HMRC work out what you owe. If it's after that, you have to work it out for yourself. Provided you know the proceeds and the original purchase costs, it can just be a matter of summing the proceeds, subtracting the costs and comparing it to the annual allowance.

[XFool]

I have absolutely no idea. Which is rather the point.

I would expect it follows the usual rules. If you submit a return by 30th September, HMRC work out what you owe. If it's after that, you have to work it out for yourself.

Yes. Oh dear. Hadn't thought of that.

(I was late in year, as had a big problem resulting from a computer calamity - which I mentioned on my return)

Provided you know the proceeds and the original purchase costs, it can just be a matter of summing the proceeds, subtracting the costs and comparing it to the annual allowance.

It isn't...

[Lootman]

Was there anything to pay?

I have absolutely no idea. Which is rather the point.

Subtract the sum of all the cost bases from the sum of all the net proceeds. Call that amount N.

Is N less than £12,300? If so, no CGT to pay.

If N > £12,300, then CGT due is 10% of that excess.

If N plus all other taxable income takes you above £50,270 then CGT goes to 20% of that additional excess.

CGT rates are a bit higher for property sales.

[XFool]

Subtract the sum of all the cost bases from the sum of all the net proceeds. Call that amount N.

Is N less than £12,300? If so, no CGT to pay.

No, no!

If it was a case of "I bought on Monday, sold on Tuesday" there wouldn't be a problem.

It's a case of THIS date or THAT date - dates being in different tax years. Plus "What exactly did happen in May 23 1997?..."
Plus, When is a company at Zero Value? When it is no longer quoted? When liquidators are appointed? When a winding up notice is issued? And AIM companies are not mentioned on HMRC's list of "Companies of negligible value" etc.

[Lootman]

Subtract the sum of all the cost bases from the sum of all the net proceeds. Call that amount N.

Is N less than £12,300? If so, no CGT to pay.

No, no, no!

If it was a case of "I bought on Monday, sold on Tuesday" there wouldn't be a problem.

It's a case of THIS date or THAT date - dates being in different tax years. Plus "What exactly did happen in May 23 1997?..."
Plus, When is a company at Zero Value? When it is no longer quoted? When liquidators are appointed? When a winding up notice is issued? And AIM companies are not mentioned on HMRC's list of "Companies of negligible value" etc.

If you do not have the base data because you did not make and keep proper records then obviously you cannot compute the CGT due, and nor can HMRC, and nor can anyone here.

Sounds like you have a lot of research to do.

[XFool]

If you do not have the base data because you did not make and keep proper records then obviously you cannot compute the CGT due, and nor can HMRC, and nor can anyone here.

Sounds like you have a lot of research to do.

Sigh! I have the data (see my OP) - after much effort - but, as I am not an HMRC Capital Gains Tax Expert, I am unable to know how to correctly process it.

I was vaguely hoping that HMRC might have the know-how to do that and let me know the result.

Anyway, it may be that the 30th September deadline might prove to be the most significant factor here. I will just have to wait and see what happens.

[bluedonkey]

What tax year is it? You mention 2021. Is that 2020/21 or 2021/22?

When did you submit your return?

[Alaric]

When did you submit your return?

Isn't the premise of SELF assessment that the taxpayer is expected to acquire sufficient knowledge to calculate it for themselves? Failing that, pay an expert to do it for them. If submitted early enough, HMRC will work it out themselves with the risk to the taxpayer that they will interpret things to increase rather than reduce tax.

[XFool]

What tax year is it? You mention 2021. Is that 2020/21 or 2021/22?

When did you submit your return?

For tax year 2021-22 filed on 24 Jan 2023.

The main thing was the takeover of a company by a scheme of arrangement - this triggered the whole issue of CGT.

The court confirmed the arrangement effective on a date in the tax year 2021-22, just before the end of the tax year.
The payment due was dated, when issued (not when received or cashed), in the following tax year. That is, this tax year.

I was unable to establish what was the effective date for the CGT calculation.

I need to know one way or another because, if not in last tax year it needs to be dealt with in this tax year.

[Alaric]

The main thing was the takeover of a company by a scheme of arrangement - this triggered the whole issue of CGT.

If it's a publicly quoted Company, others may have held it and worked out how to handle any potential CGT due on the implied sale.
Calculations can get messy, usually where the Company being taken over has had a complicated history of rights issues, reconstructions, demergers and capital returns. One of the more complex is British Gas. Sid's original shareholding was divided up into BG, Centrica and Lattice and then Lattice was taken over by National Grid. Slough Estates is quite complicated as well.

[scrumpyjack]

What tax year is it? You mention 2021. Is that 2020/21 or 2021/22?

When did you submit your return?

For tax year 2021-22 filed on 24 Jan 2023.

The main thing was the takeover of a company by a scheme of arrangement - this triggered the whole issue of CGT.

The court confirmed the arrangement effective on a date in the tax year 2021-22, just before the end of the tax year.
The payment due was dated, when issued (not when received or cashed), in the following tax year. That is, this tax year.

I was unable to establish what was the effective date for the CGT calculation.

The arrangement effective date will be the relevant date for the CGT disposal, not the payment due date. Just as when you sell shares on the stock market the date is the contract note date, not the settlement date. If the total proceeds in 21/22 were less than £49,200 and the gain less than £12,300, you do not need to report it on your return.

[XFool]

The arrangement effective date will be the relevant date for the CGT disposal, not the payment due date. Just as when you sell shares on the stock market the date is the contract note date, not the settlement date.

OK. That is what I said I was assuming to be the case, in my notes to HMRC. But also that I was unsure on the point.

If the total proceeds in 21/22 were less than £49,200 and the gain less than £12,300, you do not need to report it on your return.

By "total proceeds" I assume you mean payments from sales, redemptions, takeovers etc. before adjustment for any original costs involved?

You say "less than £49,200 and the gain less than £12,300". Do you mean "and" or do you mean "or"? If the former, then AFAICS, the whole issue disappears. I vaguely knew you are supposed to report transactions above a certain level, even if the capital gains are below the threshold for CGT. In this case the total from sales etc. was below £49,200.

As you can see, I am unfamiliar with CGT. I usually try to avoid it like the plague (legally I hope) as it is always a source of headache and stress. Unfortunately that means I don't bother reporting capital losses to HMRC, I have tried reporting two this last time - but then I also don't really know if they are now valid or not.

[scrumpyjack]

The arrangement effective date will be the relevant date for the CGT disposal, not the payment due date. Just as when you sell shares on the stock market the date is the contract note date, not the settlement date.

OK. That is what I said I was assuming to be the case, in my notes to HMRC. But also that I was unsure on the point.

If the total proceeds in 21/22 were less than £49,200 and the gain less than £12,300, you do not need to report it on your return.

By "total proceeds" I assume you mean payments from sales, redemptions, takeovers etc. before adjustment for any original costs involved?

You say "less than £49,200 and the gain less than £12,300". Do you mean "and" or do you mean "or"? If the former, then AFAICS, the whole issue disappears. I vaguely knew you are supposed to report transactions above a certain level, even if the capital gains are below the threshold for CGT. In this case the total from sales etc. was below £49,200.

As you can see, I am unfamiliar with CGT. I usually try to avoid it like the plague (legally I hope) as it is always a source of headache and stress. Unfortunately that means I don't bother reporting capital losses to HMRC, I have tried reporting two this last time - but then I also don't really know if they are now valid or not.

I mean AND. If total disposal proceeds are less than 4 x the annual allowance ( 4 x 12,300) and the total net gains less than the allowance 12,300, you do not need to complete the CGT pages of the return.

[XFool]

I mean AND. If total disposal proceeds are less than 4 x the annual allowance ( 4 x 12,300) and the total net gains less than the allowance 12,300, you do not need to complete the CGT pages of the return.

My calculation of net gains, after costs, of disposals etc. in tax year is over £12,300. Total gross proceeds less than £49,200. To me that implies CGT, yes?

But I also reported past losses, of unknown validity, that are more than the reported total net gain.

I'm just going to have to wait and see what happens, or write to HMRC after the new tax year starts.

[Lootman]

I am unfamiliar with CGT. I usually try to avoid it like the plague (legally I hope) as it is always a source of headache and stress. Unfortunately that means I don't bother reporting capital losses to HMRC, I have tried reporting two this last time - but then I also don't really know if they are now valid or not.

If you think CGT is complex now then you should have seen it 20 years ago when gains had to be adjusted for inflation!

I have been paying CGT for 20 years and it is basically very simple IF you maintain records of your cost basis. And the rates are simple at 0%, 10% and 20% . For shares - much more complicated if you are selling properties that are not your primary home, as I discovered between 2003 and 2010.

But then I have been using an accountant since 1998, which takes away most of the stress. At a cost.

[Alaric]

But I also reported past losses, of unknown validity, that are more than the reported total net gain.

I'm just going to have to wait and see what happens, or write to HMRC after the new tax year starts.

It can be a grey area as to when you can claim a loss on a share that has become valueless. In practice you can probably claim it whenever convenient provided it hasn't been claimed before. Presumably there's an explicit or implicit time limit.

You told us that HMRC had processed your return and given you a refund. It sounds then as they accepted that the total proceeds didn't exceed £ 49,200 and that provided they accepted all or some of the write offs, that the gain was less than £ 12,300. You didn't offer to pay them any tax and it would seem they treated that as a declaration that none was payable.

[Gersemi]

But I also reported past losses, of unknown validity, that are more than the reported total net gain.

I'm just going to have to wait and see what happens, or write to HMRC after the new tax year starts.

It can be a grey area as to when you can claim a loss on a share that has become valueless. In practice you can probably claim it whenever convenient provided it hasn't been claimed before. Presumably there's an explicit or implicit time limit.

You told us that HMRC had processed your return and given you a refund. It sounds then as they accepted that the total proceeds didn't exceed £ 49,200 and that provided they accepted all or some of the write offs, that the gain was less than £ 12,300. You didn't offer to pay them any tax and it would seem they treated that as a declaration that none was payable.

No. HMRC works on a process now check later basis. So they have just processed the return with the figures declared on it. As XFool has included notes with their return, these will be inspected at a later date and HMRC may decide to open an enquiry at that point. They must do this within 12 months of the date it was submitted. So if XFool doesn't hear anything by the 12 month anniversary of the submission of the return they can assume it has been accepted.