Tax Tip
23 Feb 2010
CGT Loss
By Niamh Higgins, Senior Tax Manager, FPM Chartered Accountants
Question
Q: I bought some shares in a company listed on the
A: A capital gain arises when an asset is sold for more than the amount originally paid for it and capital gains tax is charged accordingly. When shares are sold for less than the amount originally paid for them, a capital loss arises. Unfortunately, capital losses arising on the sale of listed shares cannot be offset against income tax liabilities. Instead, they are offset against capital gains arising either in the current tax year, or in future years.
Capital gains and losses are calculated by deducting the original cost of the asset, plus any enhancement expenditure, from the disposal proceeds received. The original cost includes any fees incurred on the acquisition of the asset and the sale proceeds can also be reduced by any fees incurred on the sale of the asset. Allowable fees would include legal fees, stamp duty and stockbroker's fees.
Capital losses arising in the tax year must be offset against any gains arising in the same year and if there is a net gain, then the annual tax free exemption (currently £10,100) is applied. If there is a net loss, the loss is carried forward to future years until relief can be used in full.
To discuss the most tax efficient way of utilising capital gains tax losses we would recommend that you speak to your professional adviser.
The advice in this column is specific to the facts surrounding the questions posed. Neither FPM Accountants LLP nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
