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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am disposing of shares in my capacity as executor to a relative. Calculating

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I am disposing of shares in my capacity as executor to a relative.

Calculating the capital gains on Rolls Royce and Banco Santander shares has left me baffled as both treat dividends as capital rather than income. Can someone with specific knowledge of the tax treatment of these shares calculate the capital gains attributable to the sale of the following:

Rolls Royce Shares
Number of shares at date of death (5 Oct 2012): 452
Value per share at death: 881.75p
4 Jan 2013: £34.35 received for redemption of C shares (at 0.01p per C share)
1 Jul 2013: £88.14 due for redemption of C shares
1 Jul 2013: £0.09 paid for fractional entitlement
6 Jan 2014: £38.87 received for redemption of C shares
26 Feb 2014: 452 ordinary shares sold for £4,414.76 (after commission deducted)

Banco Santander Shares
Number of shares at date of death (5 Oct 2012): 5,140 + 262 = 5,402
Value per share at death: 481.87p
13 Nov 2012: £24.53 received for selling rights off-market (based on 262 shares)
13 Nov 2012: 135 shares added to holding (based on 5140 shares)
9 May 2013: £26.77 received for selling rights off-market (based on 262 shares)
9 May 2013: £538.91 received for selling rights off-market (based on 5,140 shares)
30 Jul 2013: £25.94 received for selling rights off-market (based on 262 shares)
30 Jul 2013: £522.26 received for selling rights off-market (based on 5,140 shares)
14 Aug 2013: £26.76 received for selling rights off-market (based on 262 shares)
14 Aug 2013: £538.70 received for selling rights off-market (based on 5,140 shares)
22 Oct 2013: £756.91 received for selling right on market (based on 5,537 shares)
28 Jan 2013: £648.35 received for selling right on market (based on 5,537 shares)
24 Feb 2013: 5,537 shares sold for £29,816.31 (after commission deducted)

Thank you.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Without access to the paperwork issued by each of the two companies at the time of each of the disposals, it won't be possible for me to work out the capital gain on each sum received. These are treated as part disposals for CGT purposes.

Assuming that the share price for each company never fell much below the value on 5 October 2012, I would be inclined to deduct each capital sum received from the cost of the base holding (the value on 5 October 2012) which is allowed if the sum received is less than 5% of the value of the remaining holding as you will read here.

I've read an article on this which specifically mentions Rolls Royce and Santander from the taxation.co.UK website here but it may not be accessible as it is a membership site. Alternatively, google the term "santander rights off market disposal CGT" and select the first result which should take you to the page I looked at.

By deducting the sums received from the base cost of the holding, you are effectively deferring any liability to Capital Gains Tax until a disposal of all or part of the main holding as you are reducing the cost as each cash payment is received. The only problem with this as far as the Santander payments is concerned is that Spanish tax at 19% has been deducted from the payments. Of this, 78.9% (15% of the gross payment) can be offset against a UK CGT liability on the individual gains. There is no relief if there is no CGT liability so if the estate gains in 2012/13 were within the annual CGT exemption there is nothing you can do with the Spanish tax in any event. The same applies to 2013/14.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

Dear XXXXX


 


Thank you very much for trying to help with this question, but it doesn't really help me reach a definitive answer. As I said in my question, I'm looking for an answer from someone experienced with these particular shares who could calculate the specific gains involved.


 


By the way, the Spanish withholding tax that you mentioned does not apply to shares sold on market.


 


Is there anyone who can actually do the calculation for me based upon existing knowledge of the tax treatment for these shares?

Expert:  TonyTax replied 2 years ago.
Can you tell me if there are other gains which need to be declared for 2012/13 and 2013/14 and, if there are, will they total more than the CGT exemption for each year?
Customer: replied 2 years ago.

There are none for 2012/13, but I'm having to spread sales across 2013/14 and 2014/15 and apportion some of the shares to beneficiaries before sale in order to maximise utilisation of CGT allowances. So, I hope the estate does not incur any CGT liability, but it's a close call.

Expert:  TonyTax replied 2 years ago.

If you can keep the other gains down in 2013/14, then there really is no point in doing all the work required to work out the gain on each individual payment received from Rolls-Royce and Santander.

The payments from Santander total £3,109 so if you deducted that from the probate value, it would make any gain on the final sale £3,109 higher. Given that the shares were finally sold in the 2013/14 tax year (is the date 24/2/13 a typing error?) the gain would be £6,895 (£29,816 - £26,030 + £3,109). The cost of the additional 135 shares would need to be deducted from the £3,786.

The same principle would apply to the Rolls-Royce shares. The gain would be £589 (£4,414 - £3,986 + £161).

 

The fact that most of the individual payments and the final disposals occurred in the same tax year, 2013/14, means that the botXXXXX XXXXXne gain figure will be the same whichever method (the less than 5% method or the actual calculation per receipt method) is used to do the calculations in any event.


I have alot of experience of dealing with CGT on shares in general including sales of rights etc and I've dealt with many Santander share holding clients so I know what needs to be done but without the paperwork its very difficult, time consuming and, in this case, academic for the reason given in the previous paragraph. I doubt you will find anybody else here willing to take it on as there is alot of work involved but I'm willing to opt out so another expert can take a look if you wish me to. Let me know either way.

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Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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