CAPITAL GAINS REPORTING TOOL. For financial advisers only. AGENDA. What is Capital Gains Tax (CGT)? How does it work? Examples CGT planning Old Mutual Wealth’s reporting tool Support material Disclaimer. WHAT IS CAPITAL GAINS TAX (CGT)?.
For financial advisers only
What is Capital Gains Tax (CGT)?
How does it work?
Old Mutual Wealth’s reporting tool
CGT is a tax charged on gains on the disposal of an asset
The tax rate is 0%,18% or 28%
Losses can be offset against future gains (need to be registered withinfive years of loss but carried forward indefinitely)
Gain or Loss!
Annual exempt amount (AEA)
£10,600 of gain relievable at 18% or 28%
Depends on individual’s other taxable income (not just CGT)
AEA – increase year on year (RPI from 2011/12)
Use it or lose it allowance
An example – post-budget 2010
George has £20,000 income after personal allowance
£50,600 - £10,600 = £40,000 gain
£40,000 + £20,000 (income) = £60,000
£35,000 (BRT threshold) - £20,000 (income) = £15,000 @ 18% = £2,700
£60,000 - £35,000 (£20,000 income + £15,000)= £25,000 @ 28% = £7,000
Section 104 holding and regular withdrawals
Replaces the last in first out rules
Brings old gains forward
Wider considerations when selling an asset
Aggregate acquisition price
Only one disposal cost
Need to consider same assets held on and off platform
Withdrawal is % of original capital & gain
Purchase price = original investment or revised base value after previouspart disposals
A + B
A = value disposed
B = value of remaining investment
£100,000 investment x 10% growth
Value end of year 1 = £110,000
Take £10,000 withdrawal
Original base cost xA/A+B=
£100,000 x £10,000= £9,090
£10,000 + £100,000
Gain =£10,000 – £9,090 = £910
What does it offer?
Selection of reports
Adviser access only (no client access)
CIA holdings only
Individual, Joint, Trustee and Corporate cases
Shows gains and losses with no assumption of ownership split
No assumption made of available exemptions or losses
Reports gains and losses not tax owed
Provides individual reports per CIA holding
Ability to change “take on” position for re-registration cases
What the reports include
Deductions for charges and payment of nominated trail
If you have 10 funds and nominated trail is paid on each fund, this is 120 transactions in one year
SIC is shown as two deductions
Re-invested income impacts 104 holdings on income units
Accumulation units acquisition price increase for CGT purposes on reinvestment of notional income distributions
What the reports include
Important information relating to report outputs
Over 95% reconciliation
Small % may create reconciliation queries
Save report and e-mail to Old Mutual Wealth if query can not be resolved (normal contact route)
Standardised process to reconcile data and amend report
The available reports
Capital gains – report for previous tax year (eg 2010/11)
Notional disposal – report showing tax position for part or full disposal mid tax year
Transaction history – for capital gains report for previous tax year
What if – disposal planning report to maximise tax opportunities
All reports need to be saved locally by adviser
The capital gains report
Automatically provided annually by Old Mutual Wealth after tax-year end (circa June) and saved
Can also be requested by adviser at any time during the year (save locally)
Provides report showing tax position for previous tax year (eg 2010/11)
Gains or losses for tax-year end
The data required for completion of self assessment
The notional disposal report
Provides a reports for part or full disposal mid year
Useful when considering advice mid year
The transactional history report
Breakdown of the data behind the CGT report should it be required
‘What if’ scenarios
Ability to review holdings and plan disposals
Maximise tax planning
Will calculate gain or loss position on specific holdings
Multiple planning scenarios (sell one fund / multiple funds or percentage of certain funds etc)
Excellent advice point
Ability to input ‘take on’ position for re-registration and migrated cases
Figures shown represent values at re-registration
Take on position should represent revised 104 holdings (inc units) and uplift in acquisition price for reinvested notional income distributions (acc units)
Old Mutual Wealth is unable to provide historic view
More details can be found at www.oldmutualwealth.co.uk/adviser/CGTreporting/
Why does it not calculate tax?
Old Mutual Wealth does not know:
if the client has used some or all of their annual exemption
if the client has other losses in that tax year to use or carry forward
if the client has the same holdings held directly or on another platform which will impact their section 104 holdings
the tax rate suffered depends on the client’s income tax rate
Impact of any repurchases (bed and breakfast rules)
Planning & advice points
Try to use annual exemption (cost efficiently)
Consider part disposals using allowance on gains to make up income shortfalls
Create losses in following tax year if gains also being realised
Remember bed and breakfast rules (30 days)
Planning & self assessment
Paper file required by 31st October
Online file required by 31st January
CGT payable by 31st January following the tax year the gain was realised
Gains or losses are recorded on SA108 (Capital gains summary form) alongside SA100 (Tax return form)
Remember – less than 150,000 individuals are expected to pay CGT in 2010/11, which represents 0.25% of the population assuming 60m people!
Presentation, video, user guides and Q&A’s are available
If initial queries are not solved by the support material please contact Old Mutual Wealth through normal channels
Whilst Old Mutual Wealth has endeavoured to provide accurate data we cannot guarantee that the calculations are correct. Consequently they should be regarded as indicative only. Whilst we believe these reports to be of assistance, we can not accept any liability for any errors or omissions in the computations. Accordingly we recommended you that you should consult your accountant or tax adviser.
This document is based on Old Mutual Wealth's interpretation of the law and HM Revenue and Customs practice as at September 2011. We believe this interpretation is correct, but cannot guarantee it. Tax relief and the tax treatment of investment funds may change.
This communication is designed for and directed at professional financial advisers. It should not be relied on by consumers.
Calls may be monitored and recorded for training purposes and to avoid misunderstandings.
Old Mutual Wealth is the trading name of Old Mutual Wealth Limited which provides an Individual Savings Account (ISA) and Collective Investment Account (CIA) and Old Mutual Wealth Life & Pensions Limited which provides a Collective Retirement Account (CRA) and Collective Investment Bond (CIB).
Old Mutual Wealth Life Assurance Limited, Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited are registered in England and Wales under numbers 1363932, 1680071 and 4163431 respectively. Registered Office at Old Mutual House, Portland Terrace, Southampton SO14 7EJ, United Kingdom.
All companies are authorisedby the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Their Financial Services register numbers are 110462, 165359 and 207977 respectively.
VAT number for all above companies is 386 1301 59.
211-4206 October 2011