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Chargeable Events on a Share Disposal?

Hi

A client's father has recently died who held a group of shares with his bank (cost £32k). The client has done some research on the subject and the bank and HMRC have told her that the disposal is not a capital gain due to the fathers death (or something similar) and is in fact a chargeable event.

Now I've only brushed this briefly in my CTA studies as it's not a popular subject nor is it a very common tax area in practice, but now it's come up, I need some assistance to fully understand the implications of this. 

The client has always been a basic rate taxpayer and has only had pension income which has put him no where near the higher rate bracket. I read that if they were a basic rate taxpayer, then the tax on the qualifying gain from the share disposal is already paid for and therefore there is no tax liability nor does the client even have to do anything regarding Self Assessment.

The shares were disposed for around £43 so the gain on the policy was only £11k. Shame it's not a capital disposal as the resulting CGT would have been a poxy £209 after the annual exemption, I'm just hoping there's no massive liability as a result of the gain. 

Please can someone clarify why it's a chargeable event and also whether my assumptions are correct on there been no tax to pay or any SA requirement?

Thanks. 

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Not enough information

Unless you ask the bank for the name of the investment/policy which is creating the po,licy we will not be of much specific use.

If this is a chargeable event there is a responsibility on the part of the investment provider to provide the estate with a chargeable event certificate. That will show the date of the original inveatment

If it is indeed a chargeable event this will give you the number of years, the gain and the associated tax credit.

If the gross gain takes the return to date of death into higher rates then you substitute the average gain over the lifetime to see if there is still a higher rate liability. If not there is top slicing relief due.and ther should be no tax impact

 

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Shouldn't be higher rate

I don't believe there is any chance that the gross gain will take the taxpayer (deceased) into higher rate. the Proceeds are only a few thousand above the basic rate band as it is and the standard proceeds - cost gain was only about £10,000.

 

Therefore from what I've read, providing that's the case, there's no requirement to disclose it in a tax return as there's no tax due. 

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need to declare

just because it does not create higher rate liability (if that is the case) it still needs including as it affects other calculations such as age allowance

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Presumably however, if they have no other income or gains (which because the guy is deceased is the case) surely regardless of the effect on age allowance (which even then I don't think will apply as I don't think his total income with the gain would exceed the limit) if they haven't been told they need to file a tax return, one would not be required. 

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Morning

If they have never been in self assessment there is no need to complete a return. You will receive a form R27 if you tell HMRC about the death which asks for details of income etc and allows executor to claim any repayment due.

From the information on the return they will decide how they wish to proceed.

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