llynaj wrote:First please excuse my naivety in asking those questions. I am now faced with a huge CGT bill upon the sale of a flat which makes up a large part of my pension. Although aware that i could offset share losses. I have never claimed a Capital loss or nil value claim. I now realise I should have. In that I have owned shares such as Crawshaw Group which now have nil value.
I am in the position of owning a Buy to Let property valued at approximately £400K, having purchased in 1990 for £35K. I estimate an approximate CGT liability of £90K.
I own shares in the former Royal Bank of Scotland now Natwest Group PLC. I purchased some £54K of shares when the Bank seemed too big to fail. Those are now valued at some £4K. I have other shares in my portfolio which if sold would cumulatively total £90K of losses.
My questions are
1 Do I have to crystallise my loss in shares before, or, in the same tax year as I sell my flat?
Realising the losses on the shares in a later tax year than the gain on the property is the most straightforward situation: the losses cannot be used against the gain. (So a succinct-but-not-very-useful answer to your question is "Yes"...)
Realising the losses on the shares in the same tax year as the gain on the property is almost as straightforward: the losses on the shares are offset against (i.e. subtracted from) the same-year gain on the property (plus any other gains you've realised in the tax year) before CGT is calculated on the remaining gains (*). If you had more realised losses than realised gains in that tax year, that would only reduce them to zero, and you would be able to carry the remaining losses forward into future tax years
Realising the losses on the shares in an earlier tax year than the gain on the property gets complicated. The basic situation for one tax year earlier is that the losses realised in that earlier tax year
must be offset against gains realised in that earlier tax year - even if those gains were below the year's CGT allowance.
If (and only if) there were more losses than gains realised in that tax year, the remaining losses could be carried forward and offset against the gain on the property.
If the losses on the shares were realised two tax years before the gain on the property, the situation for the first of those tax years is the same - but if it allows you to carry the loss forward, that only means carrying it forward one year, i.e. to the second of those tax years. You then have the following three figures for that tax year: G = gains realised in that tax year, L = losses realised in that tax year, B = losses brought forward from the first tax year to that tax year. The rules are then (a) you must offset L against G, all the way until G=0 if necessary - so you might add more losses being carried forward if L > G, but not otherwise; (b) if the remaining gains are more than the CGT allowance for that tax year, you must offset B against G, but only to the point that either B is entirely used up or the remaining gains are reduced to that CGT allowance, whichever happens first. After that, you may end up with no, fewer, the same amount of or more losses being carried forward from that tax year to be offset against the gain on the property.
If the losses on the shares were realised three or more tax years before the gain on the property, the situation for the first of those tax years is again as described in the second preceding paragraph. If it causes losses to be carried forward, they go to the second of those tax years, where they are handled as in the last paragraph. That may result in no, fewer, the same amount or more losses being carried forward into the third of those tax years, where they are handled similarly - and so on until they might end up being carried forward from the last of those tax years into the tax year in which you realise the gain on the property.
A messy process which gets messier the more tax years are involved!
To add a bit more mess:
* Losses must be claimed in the tax year in which they were realised or the four following tax years - if you leave it longer than that, you can never claim or use them (with an exception for some very old losses (roughly last century) realised before this rule was introduced). The tax year in which they were realised is either the tax year in which you ceased to own them (typically by selling them, but it can also happen if the company goes bust, goes through liquidation and is finally dissolved, so that the shares no longer exist), or the date that you validly name in a negligible value claim about them - when a negligible value claim is possible, that often gives options to take a bit of mess out of the process. For example, you mention Crawshaw Group, which looks (inexpert opinion!) to have become of negligible value in the 2019/2020 tax year. If you sell the property in the current 2021/2022 tax year, you could make a negligible value claim on the basis of it
having become of negligible value
by any later date in the 2019/2020 tax year, or any date in the 2020/2021 or 2021/2022 tax years - and you'd do well to choose a date in the 2021/2022 tax year to make the loss on the Crawshaw shares and the gain on the property be (deemed to be) realised in the same tax year. (Note that Crawshaw Group plc still exists as a company and so its shares still exist - see
https://find-and-update.company-informa ... y/04755803. They're valueless - but nothing will have caused someone other than you to own your shares, and you'll very likely continue to own them until the company is finally dissolved. It can take a
many years for a company to move from "Liquidation" to "Dissolved", but that's not to be relied upon - it basically depends how much of a mess the liquidators need to disentangle.)
* For losses realised in the current tax year (2021/2022), you straightforwardly claim the loss in the tax return when it becomes time to submit the tax return for that year. There is the issue of CGT on the property sale being payable within 30 days, while the tax return concerned can typically only be submitted quite a lot later than that - I'm afraid all I know about that situation is what I've read in
https://www.lemonfool.co.uk/viewtopic.php?f=49&t=31274.
* For losses realised last tax year (2020/2021), you either claim the loss in the tax return for that tax year (if you haven't yet submitted it) or you 'amend' that tax return (if you have). Amending a tax return is a straightforward process which you can do off your own bat using the online tax return system (with a few exceptions - the one I remember is that you cannot do it if HMRC have already launched an enquiry into your tax return).
* For losses realised in the tax year before that (2019/2020), you amend your tax return for that tax year. That continues to work until January 31st, 2022 - after that, you have to ask HMRC to 'correct' the tax return, which involves you telling them what corrections need making and leaving them to make them. This might lead them to take a closer look at the tax return and whether it was strictly speaking correct - e.g. if you originally detailed your CGT gains and losses for the tax year and left the loss concerned out, then your declaration that the return was "complete and correct to the best of your knowledge and belief" needs a bit of explaining; on the other hand, if you didn't detail your CGT gains and losses because you didn't realise that you wanted to claim losses and none of the reasons for
having to detail them applied, "I didn't realise I wanted to detail the losses" should be an adequate explanation.
* For losses realised in the two tax years before that (2017/2018 and 2018/2019), you'll need to ask HMRC to 'correct' the tax return.
* Losses realised in earlier tax years than that (2016/2017 and earlier) are out of time for claiming them: either they've already been entered into the relevant years' tax returns and are in the system, or they're no longer either claimable or usable.
llynaj wrote:2 Is the scenario I present straight forward, or, are there pitfalls I need to be made aware of? Although I do not have an accountant, I would use an accountant for this matter.
Impossible to say how straightforward it is without a lot more detail, I'm afraid - dates, how committed you are to the property sale, details of all the shares you have already sold, of all those you still own and can sell, of all those you still own and cannot sell but can make a negligible value claim about, what if anything has appeared about capital gains and losses in your past tax returns, etc.
This almost certainly makes the accountant a good idea!
Gengulphus