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Where Taxpayers and Advisers Meet

Capital Losses

JTec
Posts:7
Joined:Mon Nov 04, 2019 5:14 pm
Capital Losses

Postby JTec » Mon Nov 04, 2019 5:17 pm

Good Afternoon all,

Can someone please clarify this for me.

Are you allowed to carry forward Capital Losses on stock & shares to the next tax year, if your current tax year chargeable gains (excluding the losses) are below the personal CGT allowance, or do you have to apply the losses to the current year & effectively waste more of your CGT allowance ?

Kind Regards.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Capital Losses

Postby pawncob » Tue Nov 05, 2019 11:37 pm

Losses are carried forward in their entirety.
With a pinch of salt take what I say, but don't exceed your RDA

JTec
Posts:7
Joined:Mon Nov 04, 2019 5:14 pm

Re: Capital Losses

Postby JTec » Wed Nov 06, 2019 9:14 am

Good Morning.

Many thanks for taking the time to reply to my post, it's much appreciated.

So, basically, I can carry forward any Capital Losses into future years, until such time that I exceed my CGT allowance & then use them to offset my Capital Gains Tax for that year. Can I carry these forward indefinitely, because it mentions on the HMRC website that you have four years to claim losses, or is this restriction simply that you have four years after the disposal of the shares to include it on your tax return, & once you have, to can then carry it forward indefinitely ?

Cheers.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Capital Losses

Postby pawncob » Wed Nov 06, 2019 4:58 pm

If you DON'T claim losses you can go back four years with a late claim.
Once notified to HMRC losses last for ever.
With a pinch of salt take what I say, but don't exceed your RDA

JTec
Posts:7
Joined:Mon Nov 04, 2019 5:14 pm

Re: Capital Losses

Postby JTec » Wed Nov 06, 2019 6:17 pm

Thank you again for replying to my post, once again it's much appreciated.

I obviously completely misinterpreted the HMRC website, thinking you could only carry forward losses for four years (https://www.gov.uk/capital-gains-tax/losses), whereas in fact from what your are saying you have up to four years after you have disposed of the shares to make a claim for the loss, otherwise it expires, but & as you mention, once you do include the loss on a tax return, you can keep carrying it forward for as long as you want, until such times as you need it to reduce the Capital Gains Tax.

Thanks for clearing that up for me, you have been most helpful.

Cheers mate.

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

Re: Capital Losses

Postby maths » Wed Nov 06, 2019 9:15 pm

Capital losses of a tax year must be offset to the full against gains of that tax year even if the gains (alone) fall within the annual exempt amount.

EG
Gains 5,000. Losses 4,000. Net gains 1,000 which then use 1,000 of the annual exempt amount.
All 4,000 losses have been offset and thus no losses to carry forward.

JTec
Posts:7
Joined:Mon Nov 04, 2019 5:14 pm

Re: Capital Losses

Postby JTec » Thu Nov 07, 2019 10:09 am

Hi,

Many thanks for your post, much appreciated.

So basically under HMRC UK tax laws, I can't carry forward my losses unless the losses exceed my gains, is that correct ?

e.g. (based on £12000 annual exempt amount)

Gains £8000, Losses £5000, therefore Net Gains £3000, No CGT to pay & nothing allowed to be carried forward.
Gains £16000, Losses £5000, therefore Net Gains £11000, No CGT to pay & nothing allowed to be carried forward.
Gains £24000, Losses £5000, therefore Net Gains £19000, CGT on £7000 to pay & nothing allowed to be carried forward.

Gains £8000, Losses £10000, therefore Net Gains -£2000, No CGT to pay & £2000 Partial Loss allowed to be carried forward (indefinitely ?).

Can you please confirm that all these scenarios are correct ?

I assume all losses are treated the same, whether they are straight forward trading losses on stocks & shares, or losses incurred on shares in companies going into administration or liquidation, etc.

Cheers.

JTec
Posts:7
Joined:Mon Nov 04, 2019 5:14 pm

Re: Capital Losses

Postby JTec » Thu Dec 05, 2019 1:43 pm

Just in case anyone is still interested, I have just spoken to HMRC & 'pawncob' was right.

HMRC told me that you ARE allowed to carry forward any losses (or the balance from a partially used loss, if you didn't need to use the full loss for that year) & you can continue to do so indefinitely until such times as the balance of the loss has been used up. i.e. If your chargeable gains are below the annual allowance (currently £12,000) any losses you have can be carried forward indefinitely until such times as your chargeable gains exceed the annual allowance, whereby you can then use the loss or part of the loss (& carry forward the balance of the loss again, if need be).

So, from my previous examples, I have adjusted them as follows :-

(based on £12000 annual exempt amount)

Gains £8000, Losses £5000, therefore Net Gains £3000, No CGT to pay & £5000 Loss allowed to be carried forward (indefinitely).
Gains £16000, Losses £5000, therefore Net Gains £11000, No CGT to pay & £1000 Loss allowed to be carried forward (indefinitely).
Gains £24000, Losses £5000, therefore Net Gains £19000, CGT on £7000 to pay & nothing to be carried forward.

Gains £8000, Losses £10000, therefore Net Gains -£2000, No CGT to pay & £10000 Loss allowed to be carried forward (indefinitely).

I hope this clears it up for everyone.

Cheers.

JTec
Posts:7
Joined:Mon Nov 04, 2019 5:14 pm

Re: Capital Losses

Postby JTec » Thu Dec 05, 2019 3:53 pm

Sorry, ignore my last message, the advice I received from the HMRC tax 'Advisor' was wrong.

I have since read the HMRC manual 'CG21500' & spoken to HMRC again (a tax 'Technician' this time) & 'maths' reply was actually correct.

You have to offset tax losses for that year against your chargeable gains for that year, whether your chargeable gains are above or below the annual threshold, & you can ONLY carry forward losses for that year if they exceed your chargeable gains. However, once you have carried forward a loss, you can carry on forwarding it indefinitely into future years until such times are you need it (or part of it) as & when you exceed the annual threshold. So basically it's quite flexible once you have carried forward a loss, but not very flexible in the tax year the loss occurred, as you can end up wasting some or all of your annual allowance.

(based on £12000 annual exempt amount)

Gains £8000, Losses £5000, therefore Net Gains £3000, No CGT to pay & nothing allowed to be carried forward.
Gains £16000, Losses £5000, therefore Net Gains £11000, No CGT to pay & nothing allowed to be carried forward.
Gains £24000, Losses £5000, therefore Net Gains £19000, CGT on £7000 to pay & nothing allowed to be carried forward.

Gains £8000, Losses £10000, therefore Net Gains -£2000, No CGT to pay & £2000 Partial Loss allowed to be carried forward (indefinitely).

I hope this clarifies it once & all for everyone.

JTec
Posts:7
Joined:Mon Nov 04, 2019 5:14 pm

Re: Capital Losses

Postby JTec » Thu Dec 05, 2019 4:19 pm

Sorry, just one other point.

One thing I did forget to ask HMRC was about a late claim for a loss. As 'pawncob' pointed out, you DON'T have to claim for losses straight away, you have up to 4 years to claim for a loss.

But my question is, if you make a loss but you don't include it on your tax return, when you do finally declare it, does HMRC go back & adjust your tax returns for the previous years up to the tax year the loss originally occurred in, or does it only effect the current tax year return, in which case you could in effect actually carry a loss forward for 4 years if you don't declare it (or is that cheating the tax man/tax evasion/fraud) ?


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