Calculating the cost of nominal shares for CGT

Didn't find your answer?

A friend of mine set up a business in 2016 as sole founder and shareholder and allocated themselves 100 shares at a nominal value of £1. At the time the business had no assets. Since then the business has done considerably well and this year they will be selling a small stake in their company for £1m. It's likely that they will be eligible for BADR, and they want an idea of how much CGT they will be liable for. My question is how to value the cost of their shares for CGT purposes, which they have not diluted or changed since formation? I.e. 100 shares at a nominal value of £1.

Replies (12)

Please login or register to join the discussion.

avatar
By David Ex
10th Jun 2024 11:49

Your friend would be best advised to speak to his/her accountant rather than getting you to post on an anonymous internet forum.

Thanks (0)
Replying to David Ex:
avatar
By jimmydeano
10th Jun 2024 13:03

I agree, but here we are.

Thanks (0)
Replying to jimmydeano:
avatar
By David Ex
10th Jun 2024 13:21

jimmydeano wrote:

I agree, but here we are.

Unless you are authorised, qualified and insured to give tax advice, you shouldn’t.

Do you also give your friends medical and legal advice based on anonymous internet forums?

Thanks (1)
By ireallyshouldknowthisbut
10th Jun 2024 12:03

An AA Classic Question.

And its only Monday.

Thanks (1)
Replying to ireallyshouldknowthisbut:
avatar
By jimmydeano
10th Jun 2024 13:07

The question really is how to value the nominal shares for CGT purposes. I didn't expect it to trigger quite so emotional responses.

Thanks (1)
avatar
By paul.benny
10th Jun 2024 12:23

And if you're going to be selling "a small stake" for £1m, you can afford proper, paid-for advice that can take account of your wider circumstances.

Thanks (0)
Replying to paul.benny:
avatar
By jimmydeano
10th Jun 2024 13:06

They will be, but in the meantime would like an idea of how much of the proceeds would be kept after tax.

Thanks (0)
avatar
By paulwakefield1
10th Jun 2024 12:41

Sounds like a £100 to me.

Thanks (3)
avatar
By Tax Dragon
10th Jun 2024 13:14

A/A+B doesn't apply here: based on what you have said it is just number of shares sold x £1.

It's possible that there are things you have not said that would change the answer [to your question]; there are other things you have not said that may be relevant for the tax analysis. But that will hopefully become clear to your friend when they discuss this with their tax advisor.

Thanks (2)
avatar
By bettybobbymeggie
10th Jun 2024 13:29

I vote the base cost for CGT is x number of shares sold @ £1 per share. Not sure how you could arrive at a different answer.

Thanks (2)
avatar
By Paul Crowley
10th Jun 2024 15:21

Sounds like £1 per share to me.

Thanks (0)
avatar
By SXGuy
10th Jun 2024 19:22

I'll be a little bit more gentle with you and say I think you're asking the wrong question.

To me, it sounds like the business is not being sold for 1M based on the value of the shares, because as you've said, they are worth £100.

So my advise is to find out exactly what type of sale the business is undergoing, and that should point you in the direction of taxation.

Thanks (1)