SHARES & SECURITIES

How are gifted quoted shares valued for CGT?

Mid-price on the disposal day.

Formula for mid-price of quoted shares quoted at 100p–110p?

Lower + ½ × (higher − lower) = 105p.

Gift of quoted shares: which figure is used as proceeds in the gain calculation?

Market value (mid-price), not any price actually paid.

Does the mid-price valuation also apply to a sale at undervalue of quoted shares?

Yes. Gifts and sales at undervalue both use mid-price.

Gotcha: a quoted share valuation question shows prices £4.44–£4.50. Which price is wrong to use?

Lower (£4.44) or higher (£4.50). Use £4.47.

What is the order of matching rules for individuals' share disposals?

1) Same day, 2) Next 30 days (FIFO), 3) Share pool.

Within the 30-day matching rule, which basis applies?

First in, first out (FIFO).

Which acquisitions go in the share pool?

All purchases made before the disposal date, excluding the same day and the following 30 days.

Which direction does the 30-day matching window run from the disposal date?

Forward: acquisitions in the 30 days after the disposal.

Gotcha: shares bought two weeks before a sale. Which matching bucket?

Share pool, not the 30-day rule.

Share pool: what two things must be tracked?

Number of shares and cost.

Share pool: formula for cost of shares disposed of?

Shares sold ÷ total shares in pool × total pool cost.

Same-day and 30-day matches use which cost?

Actual cost of the matched acquisition, not average pool cost.

Disposal proceeds split across matching buckets by what?

Number of shares matched to each bucket.

If same-day and 30-day matches cover all shares sold, is the pool used?

No.

Gotcha: a loss arises on the 30-day bucket and a gain on the pool for the same disposal. What is done?

Net them. Total gain = pool gain − 30-day loss.

What is the effect of a bonus issue on the share pool?

Shares increase; cost unchanged.

What is the effect of a rights issue on the share pool?

Shares increase and cost increases by the amount paid.

What does a "2 for 1" bonus issue mean?

Two new shares per one held (holding triples).

What does a "1 for 2" rights issue mean?

One new share for every two held.

Rights issue: how is cost added to the pool?

New shares × rights price.

Gotcha: bonus vs rights, which one adds cost to the pool?

Rights issue only.

Are bonus and rights shares treated as new separate acquisitions for matching?

No. They attach to the pool as part of the original holding.

What is a reorganisation for CGT?

New shares (or shares and debentures) issued in exchange for original shareholdings.

How is original cost split on a reorganisation into quoted shares?

Pro rata to the market values of the new holdings.

On a reorganisation, which date's market values apportion the cost?

First day of quotation after the reorganisation.

Does a reorganisation create a chargeable gain?

No. The cost is just apportioned.

Is there a gain on a paper-for-paper takeover?

No. The original cost passes to the new shares.

Takeover with a cash element: how is the cash treated?

As proceeds of a part disposal.

Takeover with cash: formula for cost allocated to the cash?

A ÷ (A+B) × original cost.

In the A/(A+B) takeover formula, what do A and B represent?

A = cash element. B = market value of non-cash element at takeover.

Takeover with cash: what is the base cost of the new shares?

Original cost less cost allocated to cash.

Gotcha: which date's market value is used for takeover B, versus reorganisation?

Takeover: MV at takeover date. Reorganisation: MV on first day of quotation.

Takeover with cash: what gain is chargeable?

Only on the cash element, as a part disposal.

What is the CGT treatment of gilts and QCBs for individuals?

Exempt. No gains and no allowable losses.

Are the definitions of gilts and QCBs examinable in TX-UK?

No, background only.

QCB: is a bond convertible into shares a QCB?

No. Bonds convertible into shares are excluded.

QCB: which currency, and acquired after what date? (background only)

Expressed in £, acquired after 13 March 1984.