How to establish share cost for CGT purposes?

phlebas192

Please do NOT go with 369p as that would be significantly overstating the allowable costs and could lead to penalties.

You need to calculate the proportion of the original GEC costs that is allocated to the BAE shares. From the information earlier in this thread I think it should be:

Cost of GEC shares * 0.424 * 369 / (0.424 * 369 + X +13.4)

where X is the price (in pence) of GEC shares on 30/11/99 and 13.4p is from the value assigned to the CALS loan notes.

If you cannot find X then the only safe option is to not claim any allowable costs and treat the whole proceeds of the disposal as gains.

In your shoes I would try contacting BAE's company secretary. Normally GEC would be the first point of call but obviously that is no longer an option. 

wmb194

benny5 said:

In the absence of anything definitive I'm minded to go with this suggestion;

Woodstok2000 said:

369p looks to be the most appropriate price:

https://investors.baesystems.com/shareholder-faqs

But maybe you can contact the broker and see?

You need to know how much your GEC shares cost and how the sale of Marconi Systems was factored into their price.

I'd try to find the GEC document that spelt out the transaction details in the hope that it will tell you what the split percentage was but the problem with defunct companies is that it's hard to find things for them. Companies House's website can sometimes be a goldmine but it's hard to find the original GEC/Marconi on there.

Then again, if you don't know what you paid for the GEC shares it's all moot anyway. If you found an old GEC share price graph from around the time you bought them you could assume you paid the lowest price. At least this would mean not needing to use a zero acquisition cost.

wmb194

phlebas192 said:

Please do NOT go with 369p as that would be significantly overstating the allowable costs and could lead to penalties.

You need to calculate the proportion of the original GEC costs that is allocated to the BAE shares. From the information earlier in this thread I think it should be:

Cost of GEC shares * 0.424 * 369 / (0.424 * 369 + X +13.4)

where X is the price (in pence) of GEC shares on 30/11/99 and 13.4p is from the value assigned to the CALS loan notes.

If you cannot find X then the only safe option is to not claim any allowable costs and treat the whole proceeds of the disposal as gains.

In your shoes I would try contacting BAE's company secretary. Normally GEC would be the first point of call but obviously that is no longer an option. 

In a recent thread I remember someone complaining that the service was unavailable but for the OP it could be worth a try; the LSE's historical price service should be able to find 'X'.

https://www.londonstockexchange.com/personal-investing/tools/historical-price-service

phlebas192

I've managed to find something rather more definitive in the Marconi 2000 Annual Report https://media.corporate-ir.net/media_files/LSE/moni1/reports/2000annualreport.pdf (see page 80):

Former GEC shareholders issued with the Securities Package
on completion of the merger of Marconi Electronic Systems into
British Aerospace Plc, consisting of Marconi plc ordinary shares,
British Aerospace Plc ordinary shares and Capital Amortising Loan
Stock (CALS) will need to allocate the base cost of one GEC ordinary
share to each element of the Securities Package as follows:
Marconi plc Ordinary shares 82.7690871%
British Aerospace Plc Ordinary shares 15.8827107%
British Aerospace Plc CALS 1.3482022%

So the base cost for the BAE shares is 15.8827107% of the original cost of the GEC shares. Reading that section of the report reminds me that indexation would apply to the base cost (ie increase it) from the purchase date to 5th April 1998 if purchased before then. Sorry, but I've never dealt with indexation so you'll have to look that up. There's also stuff in that section that would apply if you purchased the shares before Nov 1982.

benny5

phlebas192 said:

Please do NOT go with 369p as that would be significantly overstating the allowable costs and could lead to penalties.

You need to calculate the proportion of the original GEC costs that is allocated to the BAE shares. From the information earlier in this thread I think it should be:

Cost of GEC shares * 0.424 * 369 / (0.424 * 369 + X +13.4)

where X is the price (in pence) of GEC shares on 30/11/99 and 13.4p is from the value assigned to the CALS loan notes.

If you cannot find X then the only safe option is to not claim any allowable costs and treat the whole proceeds of the disposal as gains.

In your shoes I would try contacting BAE's company secretary. Normally GEC would be the first point of call but obviously that is no longer an option. 

Out of interest, in this equation should the Cost of GEC shares be that at the 30/11/99 or the actual earlier cost if that can be established?

benny5

wmb194 said:

phlebas192 said:

Please do NOT go with 369p as that would be significantly overstating the allowable costs and could lead to penalties.

You need to calculate the proportion of the original GEC costs that is allocated to the BAE shares. From the information earlier in this thread I think it should be:

Cost of GEC shares * 0.424 * 369 / (0.424 * 369 + X +13.4)

where X is the price (in pence) of GEC shares on 30/11/99 and 13.4p is from the value assigned to the CALS loan notes.

If you cannot find X then the only safe option is to not claim any allowable costs and treat the whole proceeds of the disposal as gains.

In your shoes I would try contacting BAE's company secretary. Normally GEC would be the first point of call but obviously that is no longer an option. 

In a recent thread I remember someone complaining that the service was unavailable but for the OP it could be worth a try; the LSE's historical price service should be able to find 'X'.

https://www.londonstockexchange.com/personal-investing/tools/historical-price-service

Dinging up some old manual accounts records I have establish that two share purchases were made, one on the 26/4/1996 the other 1/5/1999. However, this only provides total cost in both cases, sadly no share price or quantity.

wmb194

benny5 said:

wmb194 said:

phlebas192 said:

Please do NOT go with 369p as that would be significantly overstating the allowable costs and could lead to penalties.

You need to calculate the proportion of the original GEC costs that is allocated to the BAE shares. From the information earlier in this thread I think it should be:

Cost of GEC shares * 0.424 * 369 / (0.424 * 369 + X +13.4)

where X is the price (in pence) of GEC shares on 30/11/99 and 13.4p is from the value assigned to the CALS loan notes.

If you cannot find X then the only safe option is to not claim any allowable costs and treat the whole proceeds of the disposal as gains.

In your shoes I would try contacting BAE's company secretary. Normally GEC would be the first point of call but obviously that is no longer an option. 

In a recent thread I remember someone complaining that the service was unavailable but for the OP it could be worth a try; the LSE's historical price service should be able to find 'X'.

https://www.londonstockexchange.com/personal-investing/tools/historical-price-service

Dinging up some old manual accounts records I have establish that two share purchases were made, one on the 26/4/1996 the other 1/5/1999. However, this only provides total cost in both cases, sadly no share price or quantity.

If you know the total cost that's great: total cost of GEC shares * 15.8827107% = base cost for the BAE Systems shares.

Any reinvested BAE Systems dividends after the distribution of these shares in 1999 will be a separate issue.

Split from the Marconi plc 2000 annual report:
"Marconi plc Ordinary shares 82.7690871% [GEC renamed]
British Aerospace Plc Ordinary shares 15.8827107% [subsequently renamed BAE Systems]
British Aerospace Plc CALS 1.3482022%"

DRS1

Well done @phlebas192 and @wmb194.  

phlebas192

benny5 said:

phlebas192 said:

Please do NOT go with 369p as that would be significantly overstating the allowable costs and could lead to penalties.

You need to calculate the proportion of the original GEC costs that is allocated to the BAE shares. From the information earlier in this thread I think it should be:

Cost of GEC shares * 0.424 * 369 / (0.424 * 369 + X +13.4)

where X is the price (in pence) of GEC shares on 30/11/99 and 13.4p is from the value assigned to the CALS loan notes.

If you cannot find X then the only safe option is to not claim any allowable costs and treat the whole proceeds of the disposal as gains.

In your shoes I would try contacting BAE's company secretary. Normally GEC would be the first point of call but obviously that is no longer an option. 

Out of interest, in this equation should the Cost of GEC shares be that at the 30/11/99 or the actual earlier cost if that can be established?

It's the value immediately after the transaction took place, hence 30/11/99. The way to look at is that on the 29th you had, say, 1000 shares in GEC. Immediately after on the 30th you still had 1000 shares in GEC, 424 shares in BAE and £134 in loan notes and the costs need to be apportioned between the 3 elements on the 30th based on their values on that date.

FWIW, the best I could establish was that the new GEC / Marconi price on the 30th was around 800p. Using my formula that would be 16.1% which is fairly close to the 15.88% from the Marconi annual report. The latter should certainly be considered definitive and would be accepted by HMRC.

Your purchase from 1996 should certainly be increased in line with indexation which will be to your benefit. I've never looked into this aspect since its something I've never needed to worry about but I think it will basically mean that the base cost of those shares will be 

total purchase cost of shares * RPI on 0504/98 / RPI on 26/04/1996

The cost of the 1999 purchase stays the same.

So the total cost base for your BAE shares will be:

(1996 purchase cost * March 1998 RPI (*) / April 1996 RPI (**) + 1999 purchase cost) * 0.158827107

Historic RPI values can be found at https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23

* & ** - I'm assuming that it is the March 1998 RPI that was used for the end of indexation since that was likely the published value on 5th April 1998 and that the April 96 purchase was after the RPI was published that month. You should check these although differences are probably going to be quite small.

wmb194

TheTelltaleChart said:

phlebas192 said:

Your purchase from 1996 should certainly be increased in line with indexation which will be to your benefit.

No, indexation doesn't apply at all to disposals made after a certain date (which is now many years ago).

For individuals and non-corporates that was in 2008.

"For disposals on or after April 2008 indexation was withdrawn altogether for non-corporate entities."

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg17200#:~:text=CG17200P-,CG17200%20%2D%20Indexation:%20inflation%20and%20CGT,computation%20in%20respect%20of%20inflation.