Self assessment - average price of company shares

[OM98]

I have a question on how to accurately represent company shares in my tax return, and how to work out how many I can sell without paying CGT. I I regularly receive shares in a listed company as rewards. I also regularly sell shares in that company to free up cash and avoid being over exposed.

From a CGT perspective, I know that I have a section 104 holding - i.e. a bunch of shares in the same company that were purchased at different times. I know that my CG is worked out using the average share price.

Does the average share price calculation take into account I all the shares I have ever bought in the company including those that I've disposed of in previous tax years? Or is the average share price calculated across all the shares I currently hold (so excluding shares I've disposed of in previous tax years).

Hope that question makes sense, any guidance much appreciated!

[supersport]

It’s a running average for ever, unless at some point you never owned them.

There’s a good calculation example on the HMRC website, I don’t have the link to hand.

[OM98]

Thanks supersport. I've seen the HMRC examples, I they didn't have a scenario that called out previous sales.

One final question - where I dispose of shares within 30 days of acquisition, they never become part of that section 104 holding, so therefore do not become part of that average share price calculation, correct?

[deckster]

OM98 said:

Does the average share price calculation take into account I all the shares I have ever bought in the company including those that I've disposed of in previous tax years? Or is the average share price calculated across all the shares I currently hold (so excluding shares I've disposed of in previous tax years).

It doesn't actually matter. When you dispose of shares using the average price of all those in the S104 holding, the average price of those remaining doesn't change. So all you need to know is the number of shares left in the holding after the sale, and the price that you've just used as the average. This forms the input to the calculation at the next point of disposal, along with the price of any shares you've acquired since.

[The Leaper]

deckster said:

OM98 said:

Does the average share price calculation take into account I all the shares I have ever bought in the company including those that I've disposed of in previous tax years? Or is the average share price calculated across all the shares I currently hold (so excluding shares I've disposed of in previous tax years).

It doesn't actually matter. When you dispose of shares using the average price of all those in the S104 holding, the average price of those remaining doesn't change. So all you need to know is the number of shares left in the holding after the sale, and the price that you've just used as the average. This forms the input to the calculation at the next point of disposal, along with the price of any shares you've acquired since.

I agree. This is what I always do whenever I wish to dispose of a tranche of the shares I own in my ex-employer's ESPP. I always sell sufficient shares to ensure I have no CGT liability.

Note that if the capital gain exceeds 4 x the CGT allowance for the relevant tax year, you are required to report the transaction to HMRC even though there may not be any CGT liability.

R.