CGT rate on Qualifying Corporate Bond
I have recently taken on a client who sold their company in July 2008 for a cash sum and loan notes.
The cash received was £1million and the Loan Notes were worth £1.315m. They meet the criteria of a QCB and calculations were made based on the crystalized gain in 2008/09. The base cost of the shares was minimal.
Because the 2008/09 Lifetime allowance for ER was used up (by the cash) the CGT due on the loan notes was 18%. As the loan notes have been cashed in post 23 June 2010 is the rate of tax still 18% or is it 28%?
(the client will have very little basic rate band left in 2010/11)
Who knows?
Well I thought that, if the exchange was post 5 April 2008 and the first encashment was after 22 June, the new lifetime limit would apply - and the new rates(if relevant). But HMRC seem to think otherwise. See the example here for a QCB exchange in May 2008 with encashment before and after 22 June 2010.
http://www.hmrc.gov.uk/manuals/cgmanual/cg64160.htm
I have only looked at the transitional rules for lecturing(& fun!) purposes - and that was last autumn. I've not had a specific question like this on it (fortunately!) but that was my understanding when I had a look - but I could be wrong!
I guess you either accept what HMRC say in the manual or take a closer look at the legislation and see if you can justify a claim for using the new threshold and the new rate and paying 10%!
Cathy
Should it not be
whatever the relevant rate is at the time, so on the face of it 28%