CGT concessions given to investors

Higher-rate taxpayers can use losses crystallised before the recent June Budget to avoid capital gains tax (CGT) at the new higher rate of 28 per cent – rather than having those losses set against pre-Budget gains taxable at 18 per cent, according to accountants.

Similarly, investors can offset this year’s £10,100 CGT exemption against higher-taxed post-Budget gains.

These potentially useful concessions on the new higher rate of CGT could save some taxpayers up to thousands of pounds in tax.

Tim Norkett, national head of private clients at Horwath Clark Whitehill, the accountants, says that HM Revenue & Customs (HMRC) has confirmed that taxpayers can use losses to their “best advantage”.

This means that where an investor already has gains taxable at 18 per cent from earlier this year as well as offsetting losses, it could be worth selling further assets to achieve 28 per cent tax relief.

Investors should also check their portfolio records for losses crystallised in earlier tax years that have not been used to offset previous gains, say accountants. These can also be carried forward to reduce new higher-taxed gains.

Investment losses are first set against gains in the same tax year for CGT purposes. But where an investor has additional losses these can be carried forward. Currently, there is no time limit on the number of years that losses can be carried forward.

Some investors could have crystallised thousands of pounds losses in recent years that they have yet to offset against other gains, including those who sold bank shares following steep price falls in the financial crisis.

However, investors whose shares were lost when Northern Rock and Bradford & Bingley were nationalised in 2008 are not able to claim losses on any holdings received as windfalls when the former building societies demutualised.

But windfall-holders who reinvested dividends, or who put new cash into Bradford & Bingley’s rights issue, could claim these sums as losses, says Norkett.

Some other shares are now deemed to have a nil value that can be used to calculate a total loss for CGT purposes. For example, shares in Woolworths lost all their value after the high-street chain closed down at the end of 2008, and have been included in HMRC’s list of “Negligible Value agreements”. This list gives the date when shares in failed companies are deemed to have a nil value for CGT purposes – and it can be found at www.hmrc.gov.uk/cgt/negvalist.htm