Transferring shares into a SIPP & avoiding CGT

martindias

I have been investing in Vodafone since their IPO in the year dot. Now want to sell my current holding (just over £11k) and then buy back into my SIPP.

I want to keep my CGT in the current tax year below the level when it would need to be paid. How on earth do I calculate how much I have paid for the shares over the years so I can work out the average price of a share, which I understand is what I need to do to calculate my CGT liability? I used my CGT allowance last year to re-invest my proceeds from the Verizon sale.

I'm a bit mystified. I have quite a few other share holdings (around £30k) outside my SIPP and ISA and want to transfer/import/B&B them all over the next few years, but without incurring CGT.

Any guidance much appreciated

gadgetmind

You need to read and understand the guidance on "Section 104 holdings".

Have you only ever bought or have you bought and sold? If you have only ever bought, it's easy. If you've traded, then it can get rather complicated if you don't track your average price as you go along.

The CGT situation at the time of the Verizon action was *very* complicated, and it took me several hours and a lot of spreadsheet work to capture it!

Throw in Section 104, and you've got some work to do.

However, if your current holding is £11k, you're unlikely to have a CGT liability, so won't have to declare it. Or do you have other gains during the year?

jamesd

To do it to perfection you need to know the price of the shares at the time of each purchase, adjusted as necessarily for any splits along the way. Assuming all were bought since 1982 and it's a section 104 holding as it usually would be then you add up the total price paid and divide by the total number of shares to get the average purchase price. You subtract that average purchase price from the selling price to work out your gain.

If you don't mind losing some CGT allowance you can assume a purchase price of zero so that the whole proceeds of the sale are your assumed gain. Keep that below your CGT allowance and you have no CGT to pay and don't need the actual buying prices.

If you know the lowest price ever paid you could use that instead of zero, since that'd be the worst case for the average purchase cost.

One of the nasty traps in CGT can be for people who hold accumulation funds or funds that have rebates outside a tax wrapper. They will need to know the appropriate pricing or each accumulation reinvestment and for each time the charges are rebated. So potentially once or twice a month for as long as they hold them. The accumulation issue can be dealt with by using income versions instead of accumulation. Nothing to be done about the charge rebate except deal with it or change to something that doesn't pay one.

badger09

sara.murray13 reported. New user posting very odd comments on random threads looks like preparing to SPAM

C_Mababejive

I know this is an old ish discussion but it saves starting a new one as its partially relevant. I have some VOD shares. I have mostly bought even before the VZ deal. I now need to know how much of it i can sell to keep below my CGT allowance but its too complex for me as sums is not my strong point. How would i calculate the purchase cost? Is it all just rebased even roughly to the value of new VOD shares post VZ deal or is it more complex? thanks

gadgetmind

You need to add up all the shares bought before the VZ action actually occurred and work out your cost base pre-action.

You then need to know how much cash you got, and how many fractional VZ/VOD shares.

You then need a very complicated spreadsheet, which I have made myself, or to read the very long thread on Motley fool on the subject.

I took the income option, so only did those calculations. Here are my notes.

* C, the main cash you receive
* Fe, any cash you receive for fractional entitlements to Verizon shares
* Fo, any cash you receive for fractional entitlements to consolidated Vodafone shares (probably zero)
* Ve1, the market value of the Verizon shares you receive, valued at the end of Friday February 21st
* Ve2, the market value of the Verizon shares you receive, valued at the end of Monday February 24th
* Vo, the market value of the consolidated Vodafone shares you receive, valued at the end of February 24th.

Then under the income option:
* You are taxed by Income Tax on C + Ve1.
* For CGT purposes, paragraph (D) above says your base cost for all the shares you end up with combined is increased by the part of the amount taxed by Income Tax due to the Verizon shares, so it is B + Ve1.
* Of that base cost, paragraph (D) also says that none of it goes into the Deferred shares and so all of it is apportioned between the Verizon shares and the consolidated Vodafone shares in proportion to their values at the end of February 24th, and paragraph (E) says that fractional entitlement payments are then deducted. So the base cost of the Verizon shares becomes (Ve2/(Ve2+Vo)) * (B+Ve1) - Fe, and the base cost of the consolidated Vodafone shares becomes (Vo/(Ve2+Vo)) * (B+Ve1) - Fo.

Here are my closing figures but using HL conversion rates.

New Vodafone at close on 21/2/14 £2.365
Verizon at close on 21/2/14 $47.27 at quoted fx conversion rate £28.395
New Vodafone at close on 24/2/14 £2.523
Verizon at close on 24/2/14 $46.23 at quoted fx conversion rate £27.81

After that, you know your VOD cost base, and can do the usual section 104 calculations with shares bought after that date.

And this is why we use ISAs!

C_Mababejive

Hmmm..i can feel one of my heads coming on,,(reaches for paracetamol and dark glasses..)

I think almost all my VOD shares were bought pre VZ deal. What is the cut off date? 21st FEB?

I know that after the deal i had some VOD and VZ shares and elected to take theB shares option which i think treated any tax issues as CGT rather than income? tnx

gadgetmind

Yes Feb 21st I think.

You'll need to see this thread for the slightly different equations.

http://boards.fool.co.uk/tax-implications-12959107.aspx?sort=whole

If you're talking very large sums, maybe get an accountant to do it for you.

C_Mababejive

I'm touting for clues over on The Fool...

gadgetmind

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