How to make use of a 'capital loss'
Discussion
Don't know the answer so it's worth a punt on PH!
As a result of the Mansworth v Jelley case involving the Inland Revenue, I find myself with an unexpected, and ****ing huge, capital 'loss' to offset against any future capital gain. I'm not an accountant and don't really uderstand it- it didn't feel like a loss to me! The question is how to use it- it far (and I mean distant galaxy) exceeds anything I'm ever likely to incur normally.
So how to use it? Best I can come up with so far is get involved with property development- the buy/improve/sell type or build from the ground up sort where any gain would be effectively tax free. This is some way off my normal business and doesn't sound a brilliant option in a falling market.
Anyone have any bright ideas?
TIA
Kevin
As a result of the Mansworth v Jelley case involving the Inland Revenue, I find myself with an unexpected, and ****ing huge, capital 'loss' to offset against any future capital gain. I'm not an accountant and don't really uderstand it- it didn't feel like a loss to me! The question is how to use it- it far (and I mean distant galaxy) exceeds anything I'm ever likely to incur normally.
So how to use it? Best I can come up with so far is get involved with property development- the buy/improve/sell type or build from the ground up sort where any gain would be effectively tax free. This is some way off my normal business and doesn't sound a brilliant option in a falling market.
Anyone have any bright ideas?
TIA
Kevin
I think I understand what you've 'incurred'.
Can you not just use it to off-set against your next tax bill? Or would this not get close to taking advantage?
The problem with the development route is finding the land and then funding the purchase and build(s) And of course it carries a risk with the speculation about the market being banded about.
I think some real lateral thinking is going to be required on this one
Good luck
Paul
:usualcaviatherebecauseimaybetalkingcrap:
Can you not just use it to off-set against your next tax bill? Or would this not get close to taking advantage?
The problem with the development route is finding the land and then funding the purchase and build(s) And of course it carries a risk with the speculation about the market being banded about.
I think some real lateral thinking is going to be required on this one
Good luck
Paul
:usualcaviatherebecauseimaybetalkingcrap:
it depends on what you made the loss on - e.g if you bought an antique for 10,000 and sold it two years later for 20,000 your capital gains liability would be (in 2002/2003) 7,700 tax free, & the rest at your rate of tax (22%/40%)less an indexation allowance (formerly taper relief) to allow for inflation unless it was jointly owned by you & your spouse, then it is doubled. If in a subsequent year you had bought something (insert) and made a LOSS of 10k, then your net liability would be £0 - you may carry forward a loss until it is used up. It depends (remembers how he started!) what you made the loss on as to how it is taxed. Does that help? I can help further (and get the book out) if you give a bit more info either on here or privately.
Tom
>> Edited by minimax on Wednesday 5th February 19:42
Tom
>> Edited by minimax on Wednesday 5th February 19:42
Sadly you are completely right, as minimax & pies also say.
456mgt said: I think it only applies if you sell something and make a profit, not if you buy something. Please God, let me be wrong......
I'm also in the same boat due to some incorrect advice I paid an accountant £1,500 for. Seething - you betcha!
The only way to get the money back is to make a capital gains profit that is larger than your personal allowance of £7,700.
Making that profit at the moment may be pretty hard...
All the "accountants" start coming out of the woodwork now.
The Capital Loss (has the value been quantified yet?) will be carried forward and MAY (not compulsory) be offset against Capital Gains at a future date. Each tax year, every individual is "given" a special Capital Gains Personal Allowance - for 2002/03 this allowance was £7,700. If your total Capital Gains in the tax year 2002/03 were less than £7,700, then no Capital Gain arises. If an asset is in joint names (say with your spouse), then you are each entitled to the £7,700 allowance. If this allowance is not used in any given tax year, it cannot be carried forward to future years. Deliberately triggering gains to make use of the allowance as some people do is frowned upon by the Inland Revenue (especially if the Gain happens right at the end of the tax year and is followed early in the next tax year by a new investment in similar assets - called "Bed and Breakfasting"). Gains on Assets held over a period of years will be reduced by a factor called "Taper Relief", This tries, in a crude way, to take the effect of inflation into account on the original cost of the asset. Taper Relief replaced a Retail Price Indez based calculation called Indexation a number of years ago.
There is actually no specific rate of Capital Gains Tax. Individuals pay tax at whatever their top rate of Income Tax happens to be.
Capital Gains for limited companies are treated differently in a number of key areas which I won't go into here.
Going into "Property Development" may not be the answer to your problem. "Property Development" can sometimes be interpreted by the Inland Revenue as a "trade" - especiall;y if more than one property is involved. Any "gain" incurred by a trading entity is actually "Business Profits" and, as such, any old Capital Losses being brought forward would not be eligible for offset against these profits.
However, a one off property purchase would probably be OK. If the property was used to generate income (ie Rent) Income Tax woulkd need to be declared on the Rental Income.
I hope tha above is of some help, CGT is a bit of a minefield and there are lots of hidden aspects to it. Different types of assets are often treated in different ways. As you can see from this court ruling, even the Inland Revenue don't always interpret their own regulations correctly.
The Capital Loss (has the value been quantified yet?) will be carried forward and MAY (not compulsory) be offset against Capital Gains at a future date. Each tax year, every individual is "given" a special Capital Gains Personal Allowance - for 2002/03 this allowance was £7,700. If your total Capital Gains in the tax year 2002/03 were less than £7,700, then no Capital Gain arises. If an asset is in joint names (say with your spouse), then you are each entitled to the £7,700 allowance. If this allowance is not used in any given tax year, it cannot be carried forward to future years. Deliberately triggering gains to make use of the allowance as some people do is frowned upon by the Inland Revenue (especially if the Gain happens right at the end of the tax year and is followed early in the next tax year by a new investment in similar assets - called "Bed and Breakfasting"). Gains on Assets held over a period of years will be reduced by a factor called "Taper Relief", This tries, in a crude way, to take the effect of inflation into account on the original cost of the asset. Taper Relief replaced a Retail Price Indez based calculation called Indexation a number of years ago.
There is actually no specific rate of Capital Gains Tax. Individuals pay tax at whatever their top rate of Income Tax happens to be.
Capital Gains for limited companies are treated differently in a number of key areas which I won't go into here.
Going into "Property Development" may not be the answer to your problem. "Property Development" can sometimes be interpreted by the Inland Revenue as a "trade" - especiall;y if more than one property is involved. Any "gain" incurred by a trading entity is actually "Business Profits" and, as such, any old Capital Losses being brought forward would not be eligible for offset against these profits.
However, a one off property purchase would probably be OK. If the property was used to generate income (ie Rent) Income Tax woulkd need to be declared on the Rental Income.
I hope tha above is of some help, CGT is a bit of a minefield and there are lots of hidden aspects to it. Different types of assets are often treated in different ways. As you can see from this court ruling, even the Inland Revenue don't always interpret their own regulations correctly.
Basically as others have said. With regards to property development it would be claimed to be a profession by IR and fall out of the ambit of CGT. Once here or there you'd be okay.
Motor cars are also not subject to CGT (loss or profit). Again, unless it is happening often enough to be construed as a trade. Or, if you are registered as a trader.
It could be a good time to make some "black" money "white"; if you don't have any, do you know someone else who does?
I'll have a think and see what you could use it against. Looks like those books need to be dusted off again.
Motor cars are also not subject to CGT (loss or profit). Again, unless it is happening often enough to be construed as a trade. Or, if you are registered as a trader.
It could be a good time to make some "black" money "white"; if you don't have any, do you know someone else who does?
I'll have a think and see what you could use it against. Looks like those books need to be dusted off again.
Thanks for all the help! Learnt quite a lot from this. The 'loss' has indeed been quantified 
, and was the result of exercising share options. Having thought about what's been said, it seems the best option is to use that CGT loss to offset any gain on shares I own but have'nt sold. Not at the moment though....
Ta
Kev
, and was the result of exercising share options. Having thought about what's been said, it seems the best option is to use that CGT loss to offset any gain on shares I own but have'nt sold. Not at the moment though.... Ta
Kev
Mansworth vs Jelly is all about Tax on *Share Options*.
"JoustLinks" (TM)
See
www.taxfac.co.uk/news/index.cfm
www.icaew.co.uk/library/index.cfm?AUB=TB2I_46655,MNXI_46655&tb5=1
www.cvdfk.com/webcode/content.asp?ID=S25L3P247I3505
www.inlandrevenue.gov.uk/cgt/manworth_jelley.pdf
If that doesn't answer your questions email me and I'll give you more.
J
"JoustLinks" (TM)
See
www.taxfac.co.uk/news/index.cfm
www.icaew.co.uk/library/index.cfm?AUB=TB2I_46655,MNXI_46655&tb5=1
www.cvdfk.com/webcode/content.asp?ID=S25L3P247I3505
www.inlandrevenue.gov.uk/cgt/manworth_jelley.pdf
If that doesn't answer your questions email me and I'll give you more.
J
456mgt said: Thanks for all the help! Learnt quite a lot from this. The 'loss' has indeed been quantified
Ta
Kev
PH. Its a wonderful thing. I think I have just realised that there could be a use for a large 'capital loss' that the Mrs has made over Share Options.... hmmmmn....
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