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Are liquidated shares treated as sale of assets?

Shares not bought they were gifted in 1985 the price received at liqu. was 10p less est gift value

Client received 274061 shares as gifts in or before 1985. The Company has since gone into liquidation and he has received proceeds at a value of 0.64p per share. He maintains because he has lost money on the shares there is nothing to declare. The Accountant dealing with the liquidation has told him that he has to declare this transaction. My interpretation is that is because he has realised assets over the current annual limit of (I think it is) £46K. however he has not actually realised this asset it has been forced on him, technical I know, but has some validation.

Any help please on this   

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20th Feb 2019 14:43

An asset does not need to have been sold to have been disposed of for CGT purposes. If he has realised an allowable loss on the shares, why would he not want to report this? I know I would!

But has there been a loss? Have you checked to see if a holdover election was made on the gift?

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By Ang
to Wilson Philips
20th Feb 2019 15:42

As far as I am aware there are no restrictions or otherwise with these shares, it was a family business. The loss is valid as you point out but the sum realised through the liquidation will be subject to CGTax can I claim both?

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to Ang
20th Feb 2019 19:13

If there is a loss on the disposal I’m confused as to why you think there should be tax to pay.

I’m also not sure if you understood my point about holdover. I didn’t mention any restriction.

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to Ang
20th Feb 2019 19:33

Ang wrote:

The loss is valid as you point out but the sum realised through the liquidation will be subject to CGTax can I claim both?

Ang wrote:

I am aware how tax work,...

You clearly aren't aware.

Look I'll try to help, in a simple case:-
1 .Take the amount received from the liquidation.
2. Take off from that the 1985 value when he received them.
3. That gives the taxable figure.

Then, you look at other holdings, annual exemptions, other lossses etc. Make sure you explore the potential holdover (at the time of acquisition) relief as mentioned by others.

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to Wanderer
20th Feb 2019 19:41

Wanderer wrote:

Ang wrote:

The loss is valid as you point out but the sum realised through the liquidation will be subject to CGTax can I claim both?

That was the bit of Anglish that I was struggling to turn into English.

From the OP, I thought shares were acquired at 10p and became 64p.

I'm waiting to understand the loss that is alleged to exist.

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to Tax Dragon
20th Feb 2019 20:30

I confess that having re-read the question I too am struggling to understand what the questioner is saying. Not least the “0.64p” part. Does he actually mean 0.64p, in which case proceeds would be trivial, or £0.64 (ie 64p).

When I first read it I took the post as meaning that proceeds were 10p less than gift value - thus giving a potential loss - but now I’m far less certain.

But what is evident is a basic lack of understanding

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By Ang
to Wilson Philips
22nd Feb 2019 10:43

I am sorry if I did not make matters clear, the shares were valued at 70p per share on the gift transfer in 1985 and valued by the Liquidator at 64p per share upon liquidation resulting in the loss per share of 6p which makes a total loss of £16200 with a net sale of assets a around £270K

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to Ang
22nd Feb 2019 11:01

Shares aren't valued on liquidation - the shareholders simply receive what is left in the kitty after the liquidator has paid off all creditors, taken his fee etc. In this case, that was 64p per share which is the consideration taken into account when computing the gain or loss on disposal.

It does indeed look as though there is an allowable loss of 6p per share - although you haven't confirmed whether you've checked to see if there was any holdover at the time of the gift.

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to Wilson Philips
22nd Feb 2019 11:07

Given the "in or before 1985" comment, I am not hopeful that anything has been checked.

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By Ang
to Tax Dragon
22nd Feb 2019 10:39

The shares were given a valuation of 0.70p per share upon gift transfer, the liquidator has applied a value of 0.64p per share upon liquidation giving a loss of 0.06p per share

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By Ang
to Wanderer
22nd Feb 2019 10:36

Thank you

Yes I am aware of all that

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20th Feb 2019 15:25

Ang wrote:

...The Company has since gone into liquidation and he has received proceeds .....however he has not actually realised this asset it has been forced on him, technical I know, but has some validation.

Worrying that you are suggesting that there is 'some validation' that a liquidation might might not be a disposal for CGT.
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By Ang
to Wanderer
20th Feb 2019 15:39

Not really, technically my comment is correct although I have told him there will be tax to pay just seeing if there was any mitigating circumstances we could use

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to Ang
20th Feb 2019 15:50

Ang wrote:

Not really, technically my comment is correct

This technically sounds technically ***** (Portia please enter a suitable expletive).
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By Ang
to Wanderer
20th Feb 2019 17:18

I am aware how tax work, but I was just exploring whether or not there were any mitigating circumstances that could apply.

I have already told him about the tax implications

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to Ang
20th Feb 2019 17:26

Which has no relevance whatsoever to your 'technical' comment or my response.

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to Wanderer
20th Feb 2019 17:34

I've mislaid my OPspeak dictionary again.

You somehow seem to understand. Can you translate?

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to Wanderer
21st Feb 2019 08:59

Could you please explain this "validation" of which you speak?

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to Clinton
21st Feb 2019 09:01

Clinton wrote:

Could you please explain this "validation" of which you speak?

Wasn't me, was the OP.
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20th Feb 2019 15:53

Ang wrote:

My interpretation is that is because he has realised assets over the current annual limit of (I think it is) £46K. however he has not actually realised this asset it has been forced on him, technical I know, but has some validation.

You make up your own definition and then apply that in a "technical" way.

That's not how tax works - though we have clients that think like you do.

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21st Feb 2019 11:33

@ Ang (OP).

I have difficulty reconciling your comments as follows:-

(1) "The loss is valid as you point out " (your 15.42 post on 20 February).

(2) "I have told him there will be tax to pay " (your 15.39 post on 20 February).

I believe that the "0.64p" in your opening question should read "64p" (largely because the proceeds based on "0.64p" would be substantially below the "£46K" figure quoted later in your opening question).

Your supplementary question includes the words
"the price received at liqu. was 10p less est gift value".

I interpret those words (as Wilson Philips INITIALLY interpreted them in her 20.30 post on 20 February) as including the key word "than" after "less" (largely because, without that word "than", the "gift value" would have been a minus figure !).

Hence, prima facie the gift value and proceeds figures are respectively 74p per share and 64p per share, there thus being a CGT LOSS of 10p per share (£27406.10), this Loss being consistent with the words "The loss is valid" in your 15.42 post [per (1) above].

In intending no offence, it appears possible that, given your view that a CGT liability arises, you believe that the CGT rules re a liquidation are perhaps different from a "normal" disposal.

It would assist us please if you could set out your own calculation of the CGT Gain (or Loss)[please include therein confirmation of the acquisition dates ("in or before 1985" per the opening line of your text, but "in 1985" per your supplementary question)].

Basil.

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22nd Feb 2019 10:59

OK, I think I have identified your confusion.

There isn't a (loss on) disposal for £Nil followed by taxable gain on liquidation.

There a single loss of 6pps and your question "The loss is valid as you point out but the sum realised through the liquidation will be subject to CGTax can I claim both?" is where you are confused - and therefore where you are confusing (me, at least).

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22nd Feb 2019 11:04

But you do need to address Wilson's point about the holdover, if the gift was after 1982. It would not be unlikely that the base cost would be the same as the nominal value, in a family company.

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22nd Feb 2019 12:05

Why is everybody putting so much effort into this?

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