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bigduckontax, Accountant
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This comes on behalf of a TA Veterans Association, which is

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This comes on behalf of a TA Veterans Association, which is incorporated as a company limited by guarantee and is therefore subject to corporation tax on capital gains and interest earned on bank accounts and gilts. As at 31 January 2014, we held 4620 Vodafone shares with a value of £10,289, and which had a cost of £8,089.
On 6 Feb we received a divi of £163.09 at 3.53p per share - nothing to be done
Our portfolio is "execution-only" with Barclays. When Verizon arose, we opted to do nothing with the forms sent to us, which meant we were happy to sell Verizon, and take the proceeds as income.
On 26 Feb, our portfolio screen screen showed that we now held 2,520 Vodafone at a cost of £7,497 and a then value of £6,187.86, and secondly that we held 121 Verizon at a cost of £3,894 and a value of £3,353.18.
The account screen shows the following entries:
3 March Sale of 121 Verizon (proceeds) Cr £3,356.86
6 March Divi on 4260 Vod at 29.57p per share Cr £1,366.18
6 March Fractional payment on Verizon Cr £ 14.31.
Our questions, for your kind attention, are:
1 Does the reduction in cost of our holding have any tax consequence, and how should it be shown in our accounts?
2. Are we correct to treat all receipts from 3 to 6 March as income?
3. Is there any Corporation Tax liability beyond the "tax credits" which we cannot reclaim?
Many thanks for looking at this. I am a solicitor retired fourteen years, and find this case outside my scope, which was limited
Hello BH, I'm Keith and happy to help you with your question. I was the Hon Treasurer of a company limited by guarantee for over 13 years and went through all these hoops myself!
Firstly dividends are Franked Investment Income and thus outside the scope of Corporation Tax. There is no notional tax on such distributions although the docket will say that 10% has been deducted, but a company cannot reclaim same. Such income is entered in the books of the company as income, but deducted from profits in the Corporation Tax (CT) calculation.
Companies are not subject to Capital Gains Tax [yippee], but soft; here is the HMRC advice of the subject:
'What are chargeable gains?
Generally, when your company or organisation sells or otherwise disposes of an asset (other than trading stock) for more than it paid for it, it may make a 'capital gain' and it may have to pay tax on this gain.
If your company or organisation is liable for Corporation Tax and makes a capital gain, that gain is known as a 'chargeable gain'. So a chargeable gain might arise if, for example:
Your company sells, gives away, exchanges (whether or not any money changed hands), transfers, or otherwise disposes of all or part of an asset
Your company receives a capital sum by way of compensation when another person damages or destroys an asset owned by the company.'
In basic terms any gain, or loss, goes into the company's Profit and Loss Account and is taxed under the CT regime.
It would be acceptable to leave the Balance Sheet showing the original cost of Investments under Assets, but a note should indicate the current total value of such securities as at Balance Sheet date.
Actually, it is quite simple as you can see. I do hope I have helped you through these book keeping problems.

Small point I missed, sorry; you post the receipt for the Verizon sale to the Investment ledger heading at its cost price and adjust for any gain or loss through the Profit and Loss Account, as explained before.

By the by your question was answered by a retired Royal Army Pay Corps and Adjutant General's Corps (Staff and Personal Services) Major who started as a Royal Engineer (Transportation) and came to RAPC through the Royal Corps of Transport.

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