Sale of Rights Issue

Capital Gain/Loss

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Is it possible to have a capital loss on the sale of lapsed rights?

 

I am going round in circles trying to determine the gain on the sale of rights issues which were sold nil paid. The value received is greater than £3K and about 20% of the market value of existing shares just before the rights issue so the small distribution exemption doesn’t apply.

 

When I calculate the gain following the example in CG57857 I end up with a loss (the share price at the time of the rights issue is 30% down on the original holding). Logically as nothing was paid for the sold rights I would expect a gain – I would appreciate if someone could point me in the right direction.

 

Thank you

Replies (3)

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By Tax Dragon
21st Dec 2021 06:15

A/A+B would give base cost of about 20% more than proceeds (aka a loss). 'Logic' for me would use A/A+B, hence give such a loss. Does statute not apply that logic here?

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By HASXX
21st Dec 2021 12:58

Thank you, and yes A/A+B is logical, I wasn't thinking straight yesterday and didn't consider it a part disposal as all the rights issue were sold.

Both A/A+B and HMRCs formula in CG57857 give the same cost base and therefore a loss!

Thank you again for your help

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By Tax Dragon
21st Dec 2021 16:34

HASXX wrote:

Both A/A+B and HMRCs formula in CG57857 give the same cost...

Ah, then I guess that answers

Tax Dragon wrote:

Does statute not apply that logic here?

Thanks.

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