Share Save/Business Asset/CGT

[Deleted User]

Hi,

I read on an earlier thread here, about being an employee, owning shares in the company and being able to reduce CGT by claiming them as a Business Asset.

I was in a 5 year (1991/96) share save with the utility company that I worked for, and only recently got rid of them when it was taken over, which means I have a CGT liability for 2006/07.

I am about to file an online SA tax return, (first time), can I claim those shares as a Business Asset, or do I need to be still employed with the company as I am no longer an employee and was not an employee at time of disposal?

Thanks.

Murdina

It's quite complicated. Did you work for the company after 6/4/00? If so, then for the period of time you worked for them from that date to when you left, you can claim business asset taper relief. For the rest of the period, or the entire period since taper relief came in in 1998, you get non business asset taper relief.
If you are entitled to both, work out the gain and split it into 2 parts on a time apportioned basis time shares were business asset/time it was not. You then apply the taper rate for business or non business (taking the period from March 1998 - since I assume you owned the shares then - up until the date you sold them). You count only complete years to get to your taper relief percentage but there is a bonus one year added for NON business only if you owned the shares at 18 March 1998 (the day taper was announced).
I hope this makes some sense - it is quite complicated. If the gain is likely to be very material, it may well make sense to ask a local accountant or tax adviser if they would cast an eye over your sums for a modest fee (though given the hoops they have to jump through now to take on new clients, this may not be possible).
Don't forget indexation will apply up to March 1998 too.

jimmo

I fear it’s even a bit more complicated than Murdina suggests. From the details you have posted so far you seem to have acquired the shares in 1996 and will therefore be entitled to indexation relief from 1996 to 1998.
Whether you worked for the company or not from March 1998 to 5 April 2000 the shares were definitely non-business assets.
If you worked for the company after April 2000, then, as Murdina says, the shares will have been business assets for the period from April 2000 to the date you left.
As you said you were no longer an employee when you sold the shares there is clearly a period after you left to the date of sale when the shares were non-business assets.
Based solely on the fact that you had to ask the question, you are probably a CGT novice and I seriously doubt that you will be able to make an accurate calculation at your first attempt.
I suggest.
First and foremost, get your return to HMRC in good time. You will be liable to CGT for 2006/07 so if your Return is late you will definitely have the automatic penalty of £100.00.
If necessary, you will need to complete your return on the basis that you are only entitled to non-business taper but also show on the Return that your figures are provisional. You can amend them later.
You really should by now have a pretty good idea of the tax bill you expected to pay on 31/1/08 assuming that you were only going to be entitled to non-business taper.
If you have the funds available I think you should pay the tax due on that basis and reclaim it when you get this sorted out.
Next, attack the computation.
If you are comfortable posting accurate details on here someone will do the calculation for you. You’re almost guaranteed that if the person who does the calculation gets it wrong then other posters will pick up on any mistakes and the calculation will be right in the end.
Details required are:
Actual date of purchase of the shares (frequently referred as the date of exercise of the option).
Cost of purchase
Date employment ended
Date of sale of shares
The amount you received.
Just one other thought. I really think you will be hard pushed to get a good accountant to look at this for you now. At this time of year they are usually burning the midnight oil because most of their regular customers seem to think that if they give the accountant their business records now the accountant will have no problem sorting it all out by 31/1/07.
By strange contrast, the Inspectors at HMRC are relatively quiet, because they know the accountants are so busy. If you go today to an Enquiry Centre you might get a really good service.

[Deleted User]

Hi,

thanks for the replies, gosh, does seem rather complicated.

I finished with the company end of November 1997, so that rules out my business asset option.

I like your turn of phrase jimmo, 'Next, attack the computation', wish it was that easy.

As an employee at time of privatisation, I was entitled to free shares, free and matching shares, had the 5 year share save, bought some shares in part payment, and sold them before the second tranche was due, received bonus shares on the initial purchase of those, there was a rights issue, there was a return of cash, I sold about half before the end of tax year 2007 and the rest were taken over May 2007.

Hope that makes some sense, would take me some time to provide figures.

Thanks for reading.

Murdina

this is seriously complicated and at any time of year an accountant may well charge you quite a bit to go through it all. It's the sort of CGT calculation that can take ages to do, but may not end up with much tax at the end! Depends if they have the right software or not to do it quickly - it is not the taper relief aspect which is the problem, but the complicated rules for shares/share pools/identifying acquisitions and disposals.
Just as a starting point though how much money did you for the shares concerned? Your disposals are spread over 2 tax years and of course you get £8,800 and £9,200 tax free. Now lets assume for sake of argument that you are entitled to 30% taper and 35% taper ( I may be a year out for non business but no doubt someone will get this corrected!). In 2006/7 you would need a gain of at least £12,571 at a taper rate of 30% to start to pay tax - so if your gross proceeds are less than this, stop worrying. For 2007/8 the figure would be around £14,150 at a taper rate of 35%. You may well be talking well more than this, but best to get this point dealt with first.

[Deleted User]

Hi,

gosh more complicated, thanks for the reply,

wish you were sitting here beside me, have all the paperwork, but just perplexing.

jimmo

You really do need to put all the information in chronological order. Suggest you do a spreadsheet with the following headings.
DATE: NUMBER OF SHARES ACQUIRED: COST: NUMBER OF SHARES SOLD: PROCEEDS OF SALE.
Don’t try to do anything fancy with the figures at this stage. Just get the information you have into what is a usable form.
Where you got free shares the cost is clearly nil
If you acquired and sold shares on the same day make one entry for the acquisition and another for the sale.
If I’ve explained that properly and you can follow then each line of the spreadsheet will either have a figure of cost or a figure for sale proceeds. It will not have both. Also, if you have now sold all the shares if you total the columns for numbers of shares acquired and number of shares sold they should match.

If you can manage that with no gaps I really would suggest you try a visit to your local HMRC Enquiry Centre. In my latter days there the person you would need to see was called a technical advisor. If you’re lucky you will see one there and then but you might have to make an appointment for another day. If you’re very lucky and hit it off with him or her that person might actually do all the calculations for you. That’s a bit beyond the “call of duty” but it really could happen.
If the technical advisor doesn’t actually do the computations you should still get some benefit from the advice.
At this stage, you will probably have 2 choices.
1) Publish all the details here. As I said before, one of us will do the calculation for you.
2) Seek professional advice and expect to have to pay a serious fee.
If you can‘t manage to balance your shares acquired and shares sold in your spreadsheet then I am afraid that you will have a major problem.
You could still try your local HMRC Enquiry Centre. The technical advisor does have access to public records of the share re-organisations in PLCs and may be able to fill in the gaps.
If not then you probably have to go for professional advice.

[Deleted User]

Hi,

thanks again, will 'attack' tomorrow, and try to get things laid out.

[Deleted User]

Hi,

jimmo and Murdina,

I have at last managed to get things laid out in excel, though when I preview post, the columns are all over the place, and not easy to follow.

Would either of you mind if I was to PM you?

Thanks for your advice so far.

jimmo

I don’t do PMs. Whilst it is your money at stake, not mine I really feel uncomfortable with the concept of one to one advice. We all make mistakes and I really feel more comfortable knowing that others can see the details.
I do know your problem though and whilst its not an ideal solution I cut and paste from excel to word and then paste the word document to the forum.
That way each line or row is preserved.
Give it a try.