Capital gains tax

OPENSPACES

I suppose the question is why do they want to know it. I suppose it just a ruse to find out how much money you have tucked away

Previn

Re the 4* reporting threshold... This link suggests it has to be reported whether self assessment is completed or not....

https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

bowlhead99

It does suggest that, yes. However, the Gov UK website is dumbed down in the interests of simplicity and at the end of the day, HMRC would prefer to receive more information than less, so it's in their interest for such pages to make readers err on the side of caution. Whereas, bowlhead99 is rarely wrong.

If you go back to the underlying law:

Taxes Management Act 1970 section 8 gives HMRC broad powers to require people to do a tax return.

Taxation of Chargeable Gains Act 1992 refers to reporting limits in section 3A - which you won't find in the original version of the 1992 act on legislation.gov.uk, but it was added after Section 3 by the Finance Act 2003 (Schedule 28, Part 1, "Reporting Limits", which is on that site).

This states that where in the case of an individual:

(a) the amount of Chargeable Gains accruing to him in any year of assessment does not exceed the exempt amount for that year, and
(b) the aggregate amount or value of the consideration for all chargeable disposals of assets made by him in that year does not exceed for times the exempt amount for that year,

a statement to that effect is sufficient compliance with so much of any notice under section 8 of the Management Act as requires information for the purposes of establishing the amount in which he is chargeable to capital gains tax for that year.

So, where that takes you, is *if* HMRC have told you they want you to report your reportable activities, income, deductions etc etc for a particular period for whatever reason, it is a valid defence for the Chargeable Gains aspect of it to simply confirm in writing or through a signed return that you didn't have gains over the exempt amount and that you didn't have disposals valued at over 4x the exemption. If you sign off a full self assessment return and leave the CG pages blank, that's what you're deemed to be doing. If you cannot make that statement (eg you *do* have disposals over 4x) then you would need to comply with their request in full and disclose the disposals and related gains/losses on the return like it tells you in the instructions.

If HMRC have *not* told you that you must do a return for the period, you don't need a defence to the request to give all your proceeds and disposals information, because there is no such request. There is just the standard obligation to inform them that you have taxes which you owe (e.g. due to gains over the exemption). So, in the absence of a demand for you to deliver a tax return you don't need to worry about some "threshold" over which you would tell them about things that didn't generate a tax bill, because they are *not* asking for that information. Only by asking you to do a tax return would they be asking for that information.

In the OP's case he was explicitly told they weren't demanding him to do a tax return. So, if he doesn't have taxable gains over threshold there is no need to file any returns, reports or letters stating the gross amounts of his disposals, because as someone who has not been requested to do a return, he's not obligated to give it.

If he was someone like me, who has been asked to do a tax return, he would have to either
i) report the disposals activity (if over 4x or leading to a non exempt gain) or

ii) leave it blank to show he was under 4x and didn't have any gain not covered by the exemption.

But if he wasn't asked to do that, he doesn't need to volunteer that information if it is all exempt.

The below HMRC CGT manual page discusses this, and is consistent with the above

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg20220

That page from the manual confirms what I said, i.e.

i) a person may be required to supply information about chargeable gains, HMRC's authority for this is in TMA 70/ S8.

ii) then from TCGA92/ S3A, *if required to make a return* an individual need not make a detailed return of chargeable gains where aggregate consideration for all disposals (except exempt assets and spouse/civil partner transfers) are over 4x exempt, and the gains before deducting losses do not exceed annual exempt amnt.

If HMRC have not exercised their right to require you to make a return, and you don't have a non exempt gain to report and you don't want to declare any losses (to offset current year gains in excess of exemption, or to carry to future years) there is nothing to do.

OPENSPACES wrote: »

I have heard that if you have so many trades you can be classed as a trader in which case profit becomes classed as earnings rather than CGT. Any truth in that ?

Yes, if you are buying and selling stocks by way of business like a market trader buys and sells tat and antiquities, it can be classed as a trade. Yours won't be, as "just some pensioner with a share or two that he likes".

OPENSPACES wrote: »

With the basic rate of tax threshold being £45K and my income £30k does that mean the first £15k of gains I pay 10% on and the rest 20%

Sounds about right, after first using the annual exemption and any current year losses or prior year carried forward losses to offset the gains.

OPENSPACES wrote: »

I suppose the question is why do they want to know it. I suppose it just a ruse to find out how much money you have tucked away

If you're the kind of person with financial affairs large or interesting enough that they want you to tell them about your tax affairs through a tax return, and you are making a significant disposal (s), there is a risk that there is something subject to tax that's been missed or miscalculated.

Plus it gives them a general insight into your wealth and cashflows, which is of general interest if they have future enquiries. From that perspective, the more information they gather from you, the better (from their POV)

OPENSPACES

You may be interested to know that I have spoken to an "HMRC technician" and they are adamant that the 4 times limit applies if you are not required to complete a tax return. The view seems to be that if you have a change of circumstances which requires you complete a CGT return that constitutes a requirement to complete a self assessment. When I asked if they could check this was legally correct they said you can write in if you want. So I am assuming I must do it ??

bowlhead99

OPENSPACES wrote: »

You may be interested to know that I have spoken to an "HMRC technician" and they are adamant that the 4 times limit applies if you are not required to complete a tax return. The view seems to be that if you have a change of circumstances which requires you complete a CGT return that constitutes a requirement to complete a self assessment. When I asked if they could check this was legally correct they said you can write in if you want. So I am assuming I must do it ??

You said your shares had multibagged. So they have doubled or more. So, even if they have only slightly more than doubled, rather than tripled or quadrupled or x10, when you sell those shares the profit will be over half their proceeds.

Therefore, if you sell £25k of shares per person the gains per person will be over £12500 so definitely reportable and taxable because it's beyond the exemption. If you sell £30k per person then the gains will be over £15k and reportable and even more taxable due to being even further beyond the exemption. If you sell £40k per person then the gains will be over £20k and reportable and even more taxable and even further beyond the exemption.

So, you're probably not going to get to the "total proceeds are over 4x the allowance" point without making gains over the allowance - because your investments more than doubled in value and so mathematically even if your total proceeds were only 2x or 3x the allowance let alone 4x, your gains already exceed the allowance and you already have to tell HMRC what disposals you had that led to that calculated gain.

The "total proceeds > 4x the exemption" is only relevant to people who are selling stuff for relatively smaller gain percentages, eg they sold £46k of shares which had cost them £35k, ie only 31% profit on their investment cost, so over 4x exemption in sales proceeds but not over 1x exemption in profit. For people cashing in shares in a tax year with average 50% profit on their cost, 100% profit on their cost, 200% profit on their cost, 1000% profit on their cost, it's a moot point, as they will never be in a position of needing to disclose stuff that they weren't otherwise going to disclose.

[Deleted User]

Hi there

I'm hoping someone may be able to help me. Sorry if this isn't posted in the correct place, as it is my first attempt!

I purchased a right to buy property from the council with my mum and dad in 2005. I lived in the property with my parents until 2014. My father then died in 2015 and currently the house is to be sold by my mum as she is moving to another area of the country. Would I be liable for any part of this process? The house is registered with the land registry in all three names, and the mortgage was also in all three names (although essentially the payments came out of my bank account, up until the balance was cleared several years ago).

Any ideas/advice would be greatly appreciated.

Malthusian

Starting a new thread would be better than posting in a completely irrelevant one.

Your share of the property will partly depend on whether the property was joint tenants (i.e. on your father's death the property passed straight to your mum and yourself) or tenants in common (i.e. his third-share was distributed as per his Will).

On a mortgage-less property, the former would mean you've owned half since 2015 and if the latter it will depend on what his Will said - for example if he left everything to your mum, you would still own one-third and she owns two-thirds.

However, if you have put more in than them via the mortgage that complicates matters. You may have acquired a larger beneficial interest thanks to paying more in, unless you agreed otherwise.

So you will need to see a solicitor.

If there is a gain you will be liable for capital gains tax on your share in respect of the period you did not live in the property. So if you lived in it for 9 years and somewhere else for 3 you will pay capital gains tax on 3/12 = 1/4 of the gain.

[Deleted User]

Thank you. What about the annual allowance threshold? Even if I owned the property out right myself, isn't the overall gain on everything below the threshold? As it works out at less than half the annual allowance of around 11k doesn't it?

Malthusian

I have no idea as you didn't give us any of the figures.

[Deleted User]

Sorry about that. I purchased the house for £31,000 in 2005 however it was valued at £54,000 as we received discount. It has just sold for £84,000.