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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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In 2008 I sold my shares in a UK business to a US wealth management

Customer Question

In 2008 I sold my shares in a UK business to a US wealth management company for cash and shares.
In 2013 (September) there was a liquidity event at which time I sold some shares and received the proceeds (in US Dollars).
I am doing my self-assessment and want to know how I go about caluclating my tax liability having regard to the fact that I know I get a CGT allowance, the gain is ALL gain and the proceeds are currently in dollars.
Can you help?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

The fact that you haven't exchanged the US$ proceeds into UK£ is not relevant. The tax point is the date you sold the US shares. You can use either the exchange rate on the day you sold the shares or the average rate for the year to 31 March 2014, whichever is most beneficial to you. You'll find the average rate for the year to 31 March 2014 here.

If the UK company was one you worked for and you held at least 5% of the voting shares, you may have qualified for entrepreneurs' relief on the cash component of the original disposal of the UK shares which would have limited your CGT to an effective rate of around 10%. That relief won't apply to the shares you received as part of the original disposal.

I'm a little confused by your statement of "the gain is all gain". I assume that you mean the proceeds of the US share disposal is all gain. When you exchange shares for cash and shares in a different company, the cost of the original shares is split between the cash and the new shares in direct proportion to the value each component (the cash and shares) represents as part of the deal.

The first £10,900 of gains you made in the 2013/14 tax year will be tax free due to the annual CGT exemption. There are two main rates of Capital Gains Tax, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the sum of your income and the taxable gain for 2013/14 so one of the following scenarios will apply:

1 If the sum of your income and the taxable gain in 2013/14 was £41,450 or less, then all the taxable gain will be charged to CGT at 18%.

2 If your income alone in 2013/14 /14 was more than £41,450, then all the taxable gain will be charged to CGT at 28%.

3 If your income alone in 2013/14 was £41,450 or less but the addition of the taxable gain takes the total over £41,450, then part of the taxable gain will be charged to CGT at 18% and part to 28%.

There is some useful information on CGT and shares here.

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

Customer: replied 2 years ago.

Thank you for that - appreciated.

To clarify. If paid nothing for the shares in the UK company therefore I believe everything is a gain as there is not cost (I also owned less than 4% therefore no entrepreneurs relief.

If I gave you the figures involved wold you be prepared to do the maths (for the purpose of my self-assessment) within the price I have paid?

Bruce

Expert:  TonyTax replied 2 years ago.

I'd be happy to do the calculations.

Can you tell me how you acquired the original shares in the UK company and what you ended up with in terms of cash and shares in the US company when it bought your shares in the UK company.

Expert:  TonyTax replied 2 years ago.
I have to go out for while but I will be back at my desk by 5.30pm.
Expert:  TonyTax replied 2 years ago.
Hi again.

It's been a few days since I answered your question. Is there anything you need further clarification on?

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