Capital gain on 20 year old shares, how on earth can I calculate it correctly?

vacheron

Hi all.

I debated between posting here and the "Cutting Tax" board, but thought this would be better as it is investment related. Mods, feel free to move if appropriate.

I was wondering if anyone more experienced could help me work how on earth I would go about working out the capital gain on this mess? 

I know the numbers involved aren't huge, but I also want to understand for the future.

Background:

• 2000 - I purchased 312 "EGG" shares @ £1.60 each during their IPO (total cost of £499.20). 
• 2006 - Prudential bought back all remaining EGG shares at a cost of 0.2237 PRU shares per EGG share meaning I was entitled to 69 Prudential shares.
  
• 2008 - I claimed the above entitlement to 69 PRU shares along with the accrued dividends (totaling £31.85) which were paid to me as cash and transferred the 69 PRU shares into my Halifax share dealing service (set for dividend reinvestment)
• 2019 - In the intervening 11 years between 2008 and 2019, my number of PRU shares owned had increased to 81.28 due to dividend re-investment, at which point PRU and MNG split and I received a bonus issue of 1 MNG share for each prudential share I held, meaning I also recieved 81.28 MNG shares (along with the corresponding de-valuation of my prudential shares). 
• 2021 - I sold all my prudential shares (which had now increased to 83.1 shares, again due to dividend reinvestment) for £14.03 per share, for a total sale price of £1,165.69.
  

How would I even begin to work out what the capital gain would be following 21 years of ownership, a share conversion, over a decade of dividend reinvestment (bought at a different price each year), and a de-merger?   

Thrugelmir

Do you have capital gains on other assets to declare? 

triplea35

Do you need to? Are other Capitals gains going to take you above your £12500 annual allowance for the 20/21 tax year.

eskbanker

triplea35 said:

Do you need to? Are other Capitals gains going to take you above your £12500 annual allowance for the 20/21 tax year.

The annual CGT allowance is £12,300, you're perhaps confusing it with the (separate) income tax allowance....

vacheron

Thrugelmir said:

Do you have capital gains on other assets to declare? 

Hi Thrugelmir (and all who also posted when I was writing this).

Yes, that is the issue.

This month I have recieved the share certs for a 5 year SAYE entitlement which has just matured, I have transferred these paper certs to my online account which have just cleared and selling them all before April would take me well over the CGT threshold.

I would therefore prefer to sell as many as possible this year but still keep my head under the radar!  

I'm also keen to maximise this years allowance just in case Mr Sunak decides to neuter the allowance to pay for Covid etc. in future years.

masonic

Personally, I'd just treat it as 100% capital gain for the purposes of working out how much remaining CGT allowance you have to play with. Time and effort saved will be worth it.

C_Mababejive

I'd just wing it..

verybigchris

masonic said:

Personally, I'd just treat it as 100% capital gain for the purposes of working out how much remaining CGT allowance you have to play with. Time and effort saved will be worth it.

No need to report a 100% capital gain when they know the purchase price of at least some of the holding.

The easy option is to report a gain of £666.49, being the difference between the sale price and original purchase, effectively treating the reinvestments as if they were purchased at nil cost.

EDIT: This is wrong, as per bowlhead's post below

masonic

verybigchris said:

masonic said:

Personally, I'd just treat it as 100% capital gain for the purposes of working out how much remaining CGT allowance you have to play with. Time and effort saved will be worth it.

No need to report a 100% capital gain when they know the purchase price of at least some of the holding.

The easy option is to report a gain of £666.49, being the difference between the sale price and original purchase, effectively treating the reinvestments as if they were purchased at nil cost.

Yes, sorry I meant treat 100% of the gain as capital gain, rather than trying to work out how much of it is capital vs income.

vacheron

Thanks everyone. Looks like the safest plan is just to consider the difference between the buying and selling price as 100% capital gain which should be a significant overestimate, though I am still interested how HMRC would go about calculating this scenario should they wish to prove (or disprove) this assumption.

I am also planning to sell the matching 81.28 MNG shares I received as part of the de-merger (just housekeeping / tidying really as the values are small), but this has resulted in a further question:

In October 2019 the split of the Prudential share price of 1506p was split - Prudential (without MNG) 1286p - MNG 220p, however my dealing account shows my MNG shares with a cost per share of 122.46 despite MNG trading at 225p when they were first listed just a few days later.

My assumption here is that my dealing account may have extrapolated an equivalent purchase price based on the original cost per share of the Prudential shares during my ownership plus the dividend reinvestments? Does that seem logical to anyone? 

If so, I guess I'll just use that to calculate the MNG portion when I sell.

bowlhead99

verybigchris said:

masonic said:

Personally, I'd just treat it as 100% capital gain for the purposes of working out how much remaining CGT allowance you have to play with. Time and effort saved will be worth it.

No need to report a 100% capital gain when they know the purchase price of at least some of the holding.

The easy option is to report a gain of £666.49, being the difference between the sale price and original purchase, effectively treating the reinvestments as if they were purchased at nil cost.

But they haven't sold all of the holding that they originally bought for £499.20, because what they bought was split into M&G and Prudential. At the time of the split, a little less than a seventh of the value of the shares turned into new M&G shares, which the OP hasn't said they've sold yet. Only about 6/7ths of the money spent on buying the original shares can be claimed as an allowable cost when selling  the PRU shares.

This link from Pru will tell you how to apportion the base cost of the Pru shares between Pru and M&G at the time of the split: 
https://www.prudentialplc.com/~/media/Files/P/Prudential-V3/content-pdf/demerger-of-mandgplc-base-cost-apportionment-uk-shareholders.pdf

So the simplest thing to do would be to say that £499.20 was originally spent on buying the first 69 Pru shares, and you don't know / can't prove what you spent on buying the next 12 shares which you bought with dividend money so you will assume £0, so the cost of the 81 Pru shares is still £499.20... and then split the £499.20 between your 81 Pru shares and 81 lower-value M&G shares at time of split (giving about £430 as a cost for the 81 Pru shares), and then assume that the next 2 shares were again added for a cost of £0 (because you can't be bothered finding out the value of dividends that were reinvested to buy those 2 shares and it will not be a huge amount of money), so the allowable cost of the 83 Pru shares is still ~£430.  Then compare the sales proceeds of the 83 shares (net of any broker costs to sell) with the £430 allowable cost.

You could increase the allowable cost by the dividends reinvested over the years, if you can find out how much that was. But if for example the last couple of shares acquired from reinvesting dividends into Pru shares at their market prices over the last couple of years only cost £25, it's only going to reduce the tax bill by your CGT rate (10 or 20%) on that £25, which is only a fiver, so you might think it's not worth trying to get the information from the company announcements.

A true 'money saving expert' might have the inclination to do it though. You would need to know the dividend rate per share (to know how much dividend you received from the holding you had at the time) and the reinvestment price per share via the dividend reinvestment program. The latter is available for recent years at https://www.prudentialplc.com/investors/shareholder-information/dividend/drip-share-purchase-price