I've taken over the management of an elderly relative's share portfolio of about 35K. Most of these she has owned for more than 20 years plus the odd privatisation stock etc but are now held in a broker's nominee a/c.
She has no record of the purchase price, so how can I work out the CGT/taper relief, if I now dispose of some/all of these? Should I just check with the registrars and work out the market price prevailing on the date of transfer to her or is there an easier way?
This must be a common problem... so could someone point me in the right direction?
The need to know is genuine though as she is likely to be liable for CGT on other assets this year, so she could easily be above, and I would like to reallocate pretty well everything she has over time.
I will try her current broker first but I don't see how he could know what price the assets were traded at originally, nor how the registrar could know?
Fair enough, though if they've been happily lying fallow for 20 years, perhaps you could rein in your enthusiasm and not to anything too drastic too soon, it wouldn't hurt to postpone some disposals into the coming tax year, which is after all only 3 months away.
Also, if inheritance is an issue, don't forget that IHT applies *instead of*, not in addition to, CGT.
I meant any broker would be able to find out the price as at any given date. I know you said there is no record of the purchase price, but I kind of hoped you might have a record, at least an approximate one, of the purchase date.
Failing that, given the shareholder's name and address, and preferably the share certificate numbers (to aid verification), the registrars should be able to tell you when they were recorded as acquired. Then use that date when pestering a broker.
If there is reason to believe the shares were acquired prior to the Indexation Allowance reference date (April 1982), it may be OK to work with market values as of that date, so ask the broker to find values for that day. Then compute indexation allowance up to April 1998, and taper relief thereafter, in the normal way.
Good point, but I think we've hopefully already used that up too. And her Maxi ISA allocation. My trouble is figuring out what's best given her difficult to compute CGT liability and how to report it to the Inland Revenue.
She's decided that some of her shares just have to go for ethical reasons (eg BAT, BAE etc.) in spite of it taking more than 20 years to get round to doing it.
Basically she has been an completely apathetic investor who never had a broker for the last 25 yrs until very recently, and who inherited some shares from her parents and was involved in some privatisations and building society buy-outs.
As for the rest I am trying to get her assets a little more focused, and get rid of the dozens of relatively small holdings she currently has.
I need to work her CGT allowance fairly efficiently over the next couple of years.
Good point. IHT issue is being addressed by keeping her total assets under
255,000. Think she's probably good for a couple more decades though... :-)
Hopefully the Inland Revenue will accept this calculation? Any case history of this to yr knowledge?
I can see a huge moral dilemma looming. Suppose her portfolio contains gilts, of the sort that used to be called War Bonds, then no doubt they too would be undesirable from the ethical view. But by association so would anything which brings money to the government. And that, of course, includes tax. So by divesting herself too quickly of ethically unsound assets, she would incur more CGT than if she waited a bit (even until April 2005), and if paying more CGT helps to fund an ethically bankrupt government, St Peter won't be impressed, will he? :-)
I suppose suggesting she marry would not go down too well, but, as you may know, inter-spouse gifts don't trigger CGT as would gifts to relatives or friends, and she could double her annual exemption that way. If it's good enough for Britney to marry for a laugh, ...
That's not a calculation, it's fact-finding, and although in principle the date of recording may differ from that which would normally be taken to be the acquisition date (namely, I gather, the date of the purchase contract), it seems the most reasonable guess available, and should therefore be acceptable, unless the shares in question were in unusually steep price gradient at the time. I'm a little less confident about whether a valuation as at 1st April 1982 would be acceptable. Alternatively re-basing would be necessary, which looks a bit complicated.
Be it as it may, you have to respect people's wishes, even if they are contrary to your own exquisite and overriding sense of greed. Personally, there are things I (and she) would not buy or sell or do. Maybe that's just me, or maybe I'm just not as greedy as you.
At any rate I still have to calculate her potential CGT liability whenever she does decide to sell her assets.
Well, no, the question is whether they'll accept a calculation based on facts found by that method. The calculation itself uses a standard formula which they can't fail to accept. They publish it, after all. The only room for doubt, unless you make a mistake in the calcultion, lies with the data going into it.
OK, you're right, I don't know. But I put it to you that to say so is being a little more unkind than I deserve.
The point is this: Suppose you ask the registar when this batch of shares was registered in her name, and he looks it up and tells you. Unless there is a mistake, it is unassailable fact that the shares were indeed recorded on that date.
You then trundle along to your local newspaper archive library and look up the share prices on that day, and possibly in the period of a few days prior, based on however long it usually took, back in those days, from execution to recording. If you then pick the lowest price in that date range, it's pretty difficult to imagine how they could in fact have been substantially cheaper (which would make the gain bigger). Given that there is no other evidence available, and that there is no obvious way to come up with a better guess for the purchase price, I really can't see the IR being minded to quibble, particularly where the sums involed are modest, can you?
I wasn't suggesting you're greedy, but in your fiduciary position relative to her you are obliged to act in her best interests, and that means to a certain extent you are obliged to be greedy in the sense of minimising unnecessary CGT all other things being equal.
If she then tells you she doesn't mind paying a bit of tax just so long as she doesn't have to keep those Aerospace or Nestle shares for even just one more day, then so be it.
Moi? I was merely suggesting she might be concerned about paying tax because doing so supports the state's immoral war effort, not because it would mean her having a few pounds less in her portfolio. In any case, she could always donate her excess shares to, say, the Red Cross, and avoid CGT that way.
Interesting problem. Does the anullment void the marriage ab initio, i.e. re-write history as if it never took place, or does it just un-do it, much as with a divorce, with effect from when the anullment itself is pronounced?
So long as they were married at the time the gift was made, it should be OK. There again, an anullment might also lead to the gift being anulled/reversed inasmuch it was linked to the marriage, so it shouldn't matter.
It could be embarrassing if the gift is allowed to retain its CGT exemption, but if it's given back, CGT is triggered at that point, because they would no longer be married.
A point to note: there is no CGT payable on death, so if she does not _need_ to change her portfolio it's better for her to leave it alone and allow her heirs to inherit the shares. they get them at the probate value and nobody pays CGT. If she sells the shares now and they inherit the money it will be taxed first at CGT when she sells, and then with IHT whe nshe dies. If she keeps it as shares then there will only be the IHT to pay.
CGT is not replaced by IHT; there's no CGT even if her estate is all within the IHT nil band. It still makes sense to think carefully before realising any capital gain if you are elderly.
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