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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15942
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I invested £25k in VCTs pre 6/4/2004. I sold them last month

Customer Question

I invested £25k in VCTs pre 6/4/2004. I sold them last month at a loss (no relief). I claimed 20% IT relief in 2003/04 and CGT deferral in 2004/05. How is the CGT deferral claw-back reported (by letter to HMRC or on my 2014/15 SA Return)? If the latter then what are the mechanics of the report? There was taper relief (now abolished). I paid 20% and 40% CGT in 2004/05 even with the VCT claim. CGT is now charged at 18% and 28%. I have substantial CG losses as at 5/4/2013 - can these be utilised?
David
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Take a look here for information on VCT Income Tax relief, Capital Gains Tax deferral and the clawback of the deferred gain..

CGT DEFERRAL

The deferred gain is "revived" to use HMRC's word in the tax year during which you dispose of the VCT shares and simply becomes part of your overall net capital gains or net capital losses figure for that tax year. In your case, that is 2014/15. You can use capital losses brought forward but you would only use sufficient of them to reduce your taxable gains to the annual exemption level which is £11,000 for 2014/15. Any balance of losses will be carried froward.

Taper relief was abolished with effect from 6 April 2008. However, if the revived gain which was originally deferred was eligible for taper relief, you can claim it as you would have at the time of that disposal based on the ownership period of the asset up to the original date of disposal of that asset.

The Capital Gains pages for the 2013/14 tax year are here. The 2014/15 pages probably won't be much different in their design, if at all. You will need to submit calculations of your gains to the tax office. The online HMRC return has software you can use or you can buy an inexpensive commercial software or you can employ an accountant or tax adviser or complete and submit the paper return by 30 September 2015 with your calculations. There are further disclosure instructions on pages 3 and 4 of HS298.

The rates of CGT you paid in 2004/05 are irrelevant. The current CGT rates apply to the revived gain and any others you make in 2014/15 in excess of the losses brought forward and the annual CGT exemption dependent on the level of your other income for 2014/15.

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

TonyTax and other Tax Specialists are ready to help you
Expert:  TonyTax replied 2 years ago.
I have to go out for a while but will be back in about 30 minutes or so to answer any follow up questions you may have.
Customer: replied 2 years ago.

Hi Tony.

Thank you for your reply to my VCT query. I actually spread my £25k over three VCTs to reduce my chances of picking a poor performer and sold them at weekly intervals. Basically, I hope, I have to re-work my 2004/05 CG, leave out the VCT deduction and give the disposal date as the last of the 3 dates in October 2014. I need to claim taper relief and tick a few boxes and do anything else mentioned in HS298. However on my original CG of nearly £64k in 2004/05 I paid CGT at 20% and 40%, how do I avoid paying CGT twice on the non-deferred portion?

This is a one-off tax query and I hope I have not signed up for further monthly credit card payments.

David

Expert:  TonyTax replied 2 years ago.

You simply exclude the non-deferred gain(s) from your 2014/15 disclosure. If you don't have a copy of your tax return for the year you deferred the gain, ask HMRC for a copy of the return and for copies of any supporting calculations that you submitted at the time.

You'd need to contact just answer about your payments as I have no control over that. As the follow up question is related to the original you don't need to pay again.