BAA and CGT vs loan note

Jul 24, 2006 2 Replies
B

BAA is apparantly sold for 9.35 UKP. And my CGT planning has already used up my allowance. If I take the loan note option, I understand it's a paper transfer, so defers CGT. But I feel the buyers have paid soooo much at 27x earnings; and at LIBOR -0.5% for the loan note, I'm not happy.



I may take the loan note to avoid/defer CGT, but feel it is a junk bond at a mediocre return.



Questions:



  1. How liquid are the loan notes? Will I be able to call somewhere and say send me cash tomorrow?
  2. Any other feelings, etc on this whole situation ?

I have made other decisions in my life based on minimising taxes and each one has been a disaster, eg not selling BSkyB at £25 in ~2000 when I really wanted to.



Thanks, BAA investor



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T

The loan notes can be redeemed at 6-monthly intervals, I think you will find.

You have the options to pay Income Tax at the higher rate (if applicable), pay CGT this year or defer until later year(s) when you will be free of CGT.

What more do you want?

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M

Yes, it is - It is supposed to be - It isn't an investment, it is them being nice to you and helping you defer CGT liability if you want to.

The loan note redemption is a fixed value, so you cant really lose (unless GF go bust).

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