Hi all, I was trawling the uk IR website and reading about CGT.
If i sold some shares,how would i know how much capital gain i had made? ,It could be that i bought them 5 or 6 years ago and dont have any documentation to refer to which would show the original purchase price?.
Further to this,if i did sell some shares,the institue that did the deal on my behalf would just send a cheque payable to me for £xxxx. How would the IR find out that i had received such a payment?. Is it common for the IR to write to people out of the blue along the lines of ",,,Mr Sproggit,you sold some shares on this date,we beleive that you are liable for CGT as we suspect you made a gain exceeding £7,700..please send a cheque asap".
If that happened,how would i quantify how much to pay if i didnt know the original purchase price?.
If i put shares in an ISA,do i become liable for CGT if i cash in the ISA?
Some libraries have copies of Extel; a publication which has such details going back for years. Of course you'd still need to ascertain a purchase date.
You could say the same about many sources of income. I am fairly certain that deals over a certain size are reported centrally and the information disseminated to interested parties.
Not especially common. But if you get such a letter it would be best to be honest.
If you know you had some income but don't know how to calculate your net gain you'd need either an accoutant or assistance from the Inland Revenue. If you are investigated and are shown to have been fraudulent or neglectful the more upfront you are the lower the penalty at the end.
Some people say that you shoudln't ask the Revenue to assist because you'll pay more. I've found that most (maybe all?) inspectors are not interested in collecting tax that isn't due.
Check Extel. Presumably the company has a share register which will show when you became a shareholder. How you access that is something you need to check with the company's information service: it could be that they leave their Register to a third party to administer.
If you comply with all of the rules relating to ISAs the capital gains experienced when the shares are correctly included within the ISA are tax free.
However, you cannot simply shelter an existing gain: ordinarily the shares have to be sold before they go in an ISA which action crystallises any earlier gain. When Building Societies demutualised I think it was possible to wrap up the shares in a PEP/ISA but special rules may have applied at that time. This is more of a financial advice issue, although it is one with potential tax inmplications. Accordingly, the input of a qualified financial adviser might be of use.
Oddly enough the IR don't accept lack of records as a good reason for not paying tax! You will have to do the best estimate you can and persuade the IR that it's reasonable. In principle CGT can apply to purchases right back to when it started, somewhere around 1965 ... in general you should keep purchase records for any capital asset until you sell it (and probably for a few years after that in case of queries).
You are required to declare all transactions if the total value in a tax year is more than twice the CGT allowance even if there is no gain, and brokers might report transactions above that limit. Aside from that, if the IR ever decide to audit you for any reason (and some audits are random) they may start asking you awkward questions about where all that cash came from. With relatively small amounts and as a one-off you might get away with it, but is it worth the risk?
No, ISAs are free of CGT. OTOH you can't put shares into an ISA, you have to sell them first and that is taxable.
You might also like to look at the rules on Venture Capital Trusts and the Enterprise Investment Scheme, which allow CGT to be deferred and possibly eliminated.
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