Section 104 - Barrett Redrow

Horracce

Hi all. 

Can anyone help with how I calculate the details of a section 104 holding following merger / acquisition?

Earlier this year, I had X shares in Barrett house builders and Y shares in Redrow. They combined to become Barrett Redrow and I now have Z shares in the new company. 

Soon, I will be making a partial disposal and need to know how to work out the section 104 figures. Can anyone spread light?

Thanks in advance.

wmb194

Horracce said:

Hi all. 

Can anyone help with how I calculate the details of a section 104 holding following merger / acquisition?

Earlier this year, I had X shares in Barrett house builders and Y shares in Redrow. They combined to become Barrett Redrow and I now have Z shares in the new company. 

Soon, I will be making a partial disposal and need to know how to work out the section 104 figures. Can anyone spread light?

Thanks in advance.

Assuming there wasn't a return of capital, the acquisition cost of X + Y = acquisition cost of Z.  Acquisition cost of Z / number of Z shares = cost per share.

Horracce

Thanks wmb194, in another circumstance, where some capital had been returned, what would be the thoughts on how to do the figures there ? 

wmb194

Horracce said:

Thanks wmb194, in another circumstance, where some capital had been returned, what would be the thoughts on how to do the figures there ? 

You'd need to adjust the acquisition cost of X or Y and you'd need to be careful to know that it's actually classified as a return of capital and not a dividend.

phlebas192

wmb194 said:

Horracce said:

Thanks wmb194, in another circumstance, where some capital had been returned, what would be the thoughts on how to do the figures there ? 

You'd need to adjust the acquisition cost of X or Y and you'd need to be careful to know that it's actually classified as a return of capital and not a dividend.

Note that the "adjusting the acquistion cost" approach only applies if the return of capital is deemed to be a "small capital distribution". The default position (ie HMRC will accept it without question) is that this is the case if the returned capital is less than 5% of the total value OR less than £3000. If it is more than 5% AND more than £3000 then it should be treated as an immediate disposal for CGT purposes (*). See https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg57835

* - you may be able to argue otherwise but you will need to justify your interpretation and be prepared to take it to a tax tribunal.