CGT and short positions

[AMTH]

Hello,

This is my first post to forum and I'm hoping someone can help me out with this statement from the HMRC about matching shares and how that then impacts the calculation to determine capital gain

You are treated as disposing of shares in the following order:
First shares acquired on the same day as the disposal (the ‘same day’ rule).
Second shares acquired in the 30 days following the day of disposal (the ‘bed and breakfasting’ rule) provided the person making the disposal was resident in the United Kingdom at the time of the acquisition if the relevant acquisition was on or after 22 March 2007.
Third shares in the Section 104 holding.
If the above rules fail to exhaust the shares disposed of, the remaining shares are matched with later acquisitions, taking the earliest one first.

It is what happens with regards to capital gain if the final line applies that is confusing me.
It is my understanding that in this circumstance you would have gone into a short position on your shares.
So if you maintain the short position past the end of the tax year; how do you calculate the gain or loss for the disposal? Do you proportion the proceeds from the sale by the number of shares you were able to match?
And what about the sales costs? Are all the sale costs allowable or do you proportion those as well?

If it helps, consider the following theoretical example:

You have a Section 104 of 9500 shares with an associated pool of cost £12,000
You then Sell 10000 shares for £1.46 and dealing costs of £300: so disposal proceeds = £14,600 and total proceeds = £14,300

I get that you match 9500 shares of the sale to your Section 104 giving an allowable cost for matched the shares of £12,000

Is the CG calculation £14,600-£12,000-£300 (disposal proceeds - allowable cost - dealing costs)
or is it (£14,600 * 9500/10000) - £12,000 - (£300 * 9500/10000) (proportion of disposal proceeds - allowable cost - proportion of dealing costs)

I'm not planning on selling into any short positions but I was interested in how the capital gain calculation would work.

Thanks!

[bd6759]

http://www.cgtcalculator.com/

[AMTH]

Unfortunately the cgt calculator doesn't appear to allow for entering into short positions - other than that it is a great resource, so thanks for the heads up.

[SImo]

cgt calculator doesn't account for foreign shares related fx conversion either so you'll need to work that out
i.e. your USD 100 gain on apple could be interpreted as a GBP 100 gain

[LozaACCS]

I have not looked at the calculator but I believe the correct treatment would be as follows,
You have made 2 disposals (more if future acquisitions do not exhaust the earlier sale)
1 9,500 from the S104 holding
2 500 from future acquisitions on a FIFO basis.
The gains need to be calculated separately,
so, the gain on the S104 holding is
Proceeds 9500 * 1.46 = 13870
costs 300/10,000 * 9500 = 285
Net proceeds = 13,585
Cost 12,000
Gain 1,585

The gain on the future acquisitions is
Proceeds (difference) 730
costs (difference) 15
Net proceeds 715

Now at this stage we do not know the cost, so assuming the sale was on 5th April, you would have until 31st January next to close the position and have the answer, is it possible to sell short on a ten month settlement deal,if so I wonder if this might then be an option rather than a short sale in which case there are different rules again.

[sdaymond]

Please note I raised a new topic: "CGT - 30 day rule - short position"

https://www.taxationweb.co.uk/forum/cgt-30-day-rule-short-position-t57158.html

You may want to put some comments.

[sdaymond]

Share identification rules for capital gains tax from 6.4.2008: identifying disposals

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg51555