ISA Limit and CGT Loss

Yes, but presumably you could hold the new shares outside the ISA, and then perhaps move them into the ISA next tax year.

I'm sure someone has...

Presumably you are talking of "reporting" in the context of your tax return.

Unless the proceeds of all your disposals exceed £32800 or gains before deduction of losses exceed £8200 (these are

2004-05 figures), you don't need to report anything, unless you want to document the loss so that you can set it against future gains. Unless you expect to make taxable gains in excess of the annual allowance in a future year, you may as well not bother.

If you do report anything, the relevant form (SA108, the Capital Gains pages of the tax return) makes clear that you would report both the £2k gain and the £3k loss (together with full details of what was sold, for how much, when, etc), and then also show the £1k net loss on the form.

Thanks very much for your reply!

That's my intention for reporting CGT loss, to offset against possible future taxable gains (one lives in hope!). So in the above example, how much can I offset?

1,000 or 3,000?

TG

Of the £3k loss you made this year, you must set £2k against the £2k gain you made this year. That then leaves £1k net loss from the current year to keep in abeyance, in a kind of "war chest", which can be set against a future gain if it should ever arise.

Of course there is only ever any point in taking stored losses out of you war chest if they can be used to real effect. This means that in the future year in question your gains would have to be more than the annual exempt amount, and you should only use enough of the stored losses to reduce the gain down to the level of the AEA.

For example, suppose the AEA next year is £9800 and you make gains of £10200 and no losses. Then you would use only £400 of the war chest money to reduce the £10200 gain to the tax free level of £9800, and that would still leave £600 in the chest for later use.

"Ronald Raygun" wrote

In a similar vein, why can't he **this year** :- " ... use only 0 of the [total 3,000 loss] to [keep] the

2,000 gain [under] the tax free level of 9?00, and that would still leave 3,000 in the chest for later use" ?

Why make the difference between years?

Wouldn't if be more consistent to *either* force losses to always be used to offset any gains, even if below AEA (as for current year above, but not future years) *or* to allow the choice (as for future years above, but not current year) ?

Good question. I'm sure a careful reading of the relevant law would provide the answer. Do let me know what it is when you find it! :-)

It might be, but it depends what you consider the general rule to be. I'm assuming (perhaps wrongly) that any losses cannot simply go directly into the war chest, but that to qualify for this privilege they have to be *net* losses from any tax year.

I suspect the real reason why same year gains and losses must be offset is because otherwise it's probably too easy to abuse to carry the allowance forward by setting up "investments" that win and lose artificially.

I buy a 1 year "bond" from a mate with a face value of 1 for 10K and I buy a zero coupon "bond" for 1 with a face value of 10k[1]. One of the two companies issuing "bonds" buys out the other company issuing "bonds" and then they settle their bonds and wind it up at the year end. I've now made a loss on one bond and a gain on another allowing me to turn my CGT allowance into something I can roll forwards.

Personally I think that homes shouldn't be exempt from CGT but you should be allowed to use up your CGT allowance against unrealized gains (effectively by increasing the original purchase price) but not be able to artificially generate a CGT loss (i.e. any loss at sale will have all the CGT allowances that were utilized deducted before it becomes a loss you can carry forward). Probably you should be able to utilize your CGT allowance against any unrealized gains (again without the ability to generate an artificial loss at final sale).

Tim.

[1] Actually I think this would count as income but brighter minds than me can probably come up with something that would count as capital gains.

£1,000, which was in one of the answers.

However, to claim the losses, you have to fill in the capital gains pages of the tax return, which gives the detailed rules for doing the calculation. (I think you are allowed to do this a few years late, if there is no other reason, but it would be safer to do it in the year you

make the loss.)

The shares are being offered at 65p, the market price is 52p at the moment, unless the market improves they may have too cut the price.

Thanks so much guys for all your advice! It's most helpful!

TG

If you take forward tax losses you have to use them against the first available gains. This would mean you have to set the whole £1,000 against the gains.

Why would it mean that?

Why could you not take forward £400 and set this against the first £400 of gains, leaving £9800 of un-set-off gains to be matched by the AEA?

Besides, there appears to be no mention in SA108 notes of what you say. Indeed, on the cotrary, it affirms that you should only use enough of your brought-forward losses to reduce your gain to, but not below, the level which the AEA will take care of.