Advice on CG losses

Soulman_2

I could be grasping at straws here but if you don't ask the question you'll never know, so here goes.

In October 1997 I bought and sold on the same day a number of shares in my then employer's Unapproved Share Scheme and subsequently paid in excess of £19k to the Inland Revenue in tax. Following the outcome of the Mansworth v Jelley case I wrote to the IR to reclaim the tax paid. Their reply in 2003 supported my claim but pointed out that whilst the tax that I had paid was Income Tax and not CG but then recorded losses to carry forward for CG purposes of £47+k.

Now, my question is, can I somehow recover the £19k paid as Income Tax instead of carrying forward the CG losses as I'm 99.99% sure that I'm not going to be in a position in the future to take advantage of these.

Any ideas would be really helpful.

cash99

No you can't.

Income tax is payable on the difference between the exercise price and the market price at exercise, CGT is payable on the difference between the market price at exercise and the market price when sold. Assuming you exercised options and then immediately sold them ( cashless exercise) then the gain was correctly taxed as income, and there would be no capital gain as the market price at exercise = the market price when sold.

The Mansworth v Jelly ruling only related to capital gains only.

Soulman_2

Thank you Jimmo for clarifying the position. I guess I'm stuck with the CGT loss.

Soulman_2

Sorry Jimmo. The company was a listed plc.

cash99

jimmo wrote: »

The Mansworth v Jelly case decided that for CGT purposes the acquisition cost to you was the open market value plus the Income Tax you paid in respect of the acquisition.
In same day transactions that produced a CGT loss equal to the amount of Income Tax paid.
Your CGT loss should have been £19,000, the amount of Income Tax paid. It looks as though your tax office has incorrectly calculated your loss by reference to the amount you were taxed on.

Not quite right. Mansworth v Jelly held that the market value at exercise plus the amount charged to tax (i.e. the gain on exercise) was the base cost for CGT, rather than just the gain on exercise. Therefore an option exercise generates a CGT loss equal to the gain on exercise.

The law has now been rewritten so that it does not apply to exercises after 10 April 2003.

The link provides the details.

http://www.hmrc.gov.uk/cgt/manworth_jelley.pdf

Letha

Putting aside for the moment that we might be out of time for filing, would anyone have an opinion on the ability of someone who was not Domiciled but who qualified in every other way and paid tax on a gain to make a claim for the CGT loss carryforward?

Londonboy_3

Letha - is the loss on a UK situs asset?

Letha

The shares where in a US company but the employment was with a UK company. Tax was paid in the UK as income.

I know the basis for UK CGT purposes under M Vs J was the Market Value plus the Gain for income tax purposes but I have also seen discussions that the income tax paid was also a cost for the capital gains calculation?