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Where Taxpayers and Advisers Meet

Capital Gains Tax on Company Shares?

mpeill
Posts:7
Joined:Wed Jun 08, 2011 2:25 pm
Capital Gains Tax on Company Shares?

Postby mpeill » Wed Jun 08, 2011 2:36 pm

I have bought shares in the company I work for, for the past several years. I am a normal rate taxpayer, on occasions slipping into the 40% rate. Is there a way I can sell the shares now, or sell some now and some next year, without having to pay CGT? In round figures:
November 2005 bought shares costing me £1500
November 2006 bought shares costing me £2500
November 2007 bought shares costing me £3500
November 2008 bought shares costing me £4000
November 2010 bought shares costing me £3300
Total cost £14800
Todays market value £36000

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Capital Gains Tax on Company Shares?

Postby section 44 » Wed Jun 08, 2011 2:47 pm

Does the stated cost reflect the CGT base cost (i.e. was/is there any deemed employment related income tax charge in respect of these shares because, for example, the shares were acquired at less than market value)?

Broadly, the shares will be deemed to be disposed of on a last in first out basis. You have a CGT annual exemption of £10,600 so why not dispose of sufficient shares this year so that your gains utilise the annual exemption only.

Do you have a spouse or civil partner who's annual exemption you could use?

mpeill
Posts:7
Joined:Wed Jun 08, 2011 2:25 pm

Re: Capital Gains Tax on Company Shares?

Postby mpeill » Wed Jun 08, 2011 4:41 pm

There was a fixed price set for the shares at the start of a period, then 12 months later we had the option of buying the shares at that fixed price, regardless of the then current market value. There was therefore a notional gain, but the shares have never been sold to realise that gain.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Capital Gains Tax on Company Shares?

Postby section 44 » Wed Jun 08, 2011 4:54 pm

Was it a HMRC approved share scheme?

mpeill
Posts:7
Joined:Wed Jun 08, 2011 2:25 pm

Re: Capital Gains Tax on Company Shares?

Postby mpeill » Thu Jun 09, 2011 10:17 am

I understand it is. I see that each year when the shares are purchased, at the end of the month of purchase I am paying an increased tax associated with the notional gain between price paid and the fair market value.

collich
Posts:64
Joined:Mon May 23, 2011 4:54 pm

Re: Capital Gains Tax on Company Shares?

Postby collich » Thu Jun 09, 2011 11:24 am

I wonder why the advice is that they are sold on a last in first out basis.

Shares of the same type are poooled for CGT purposes. So you are treated as having one asset worth £14,800 (assuming the base costs are correct and that you don't buy any shares within 31 days of the sale)

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Capital Gains Tax on Company Shares?

Postby section 44 » Thu Jun 09, 2011 11:45 am

I wonder why the advice is that they are sold on a last in first out basis.
S106A TCGA
Shares of the same type are poooled for CGT purposes
Up until 1998 and the introduction of taper relief (which saw an end to the section 104 pool)

collich
Posts:64
Joined:Mon May 23, 2011 4:54 pm

Re: Capital Gains Tax on Company Shares?

Postby collich » Thu Jun 09, 2011 3:49 pm

Are you sure? Specifically you are referring to s.106A(6) TCGA 1992. But that sub-section only seems to apply to relevant securities. Bog standard shares do not appear to be relevant securities for this section.

Certainly HMRC agree with you (see CG50564) but is it right?

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Capital Gains Tax on Company Shares?

Postby section 44 » Thu Jun 09, 2011 4:11 pm

I'm correct. As per section 106A(1) "any securities" (the reference to relevant is in the context of identified securities as opposed to a particular type). As I say, the change from the section 104 pool was brought about when taper relief came in because of the need to identify the qualifying holding period.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Capital Gains Tax on Company Shares?

Postby maths » Thu Jun 09, 2011 4:38 pm

I'm afraid section 44 you are not correct.

Amendments to the matching rules in TCGA 1992 were made in FA 2008 following the abolition of taper relief; following its abolition there was no longer any need for a LIFO approach.

Hence the amendments in s 106A(6) to refer to "relevant" securities defined in s106A(10) which no longer extends to "shares".

The matching rules now are:
same day acquisitions;
post 30 days;
"section 104 holding".

No LIFO rule for shares.


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