Download Capital Gains Reporting

/ Capital Gains Reporting
/ Contents
/ Introduction
/ Capital Gains Tax (CGT)
/ How Capital Gains Reporting works
/ Accessing Capital Gains Reporting
/ Using Capital Gains Reporting
/ Support and Further Information
/ Further Details on CGT from HMRC
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/ Introduction
Reporting of a client’s capital gains position is often an important role for an Adviser – Novia
aims to support this by providing the information required to allow Advisers to detail their
client’s position quickly and easily. Capital Gains Reporting is a web based and easy to use
tool that Novia makes available to all firms using the platform - and puts the information
required at an adviser’s fingertips.
The Capital Gains Reporting tool enables advisers to generate reports detailing both realised
and unrealised capital gains and losses for their client’s applicable holdings via the platform.
This covers all General Investment Account holdings via the Novia service and is designed
to aid their reporting of any Capital Gains Tax (CGT) to Her Majesty’s Revenue and Customs
(HMRC). A client’s CGT position depends upon their individual situation and reporting of any
tax payable remains their responsibility – further information regarding CGT and reporting
of any tax can be found below.
Two reports are available:
 Realised Gains – detailing all gains and losses created by disposals of holdings made
during the period selected
 Unrealised Gains – detailing all potential gains and losses for the portfolio
Further details:
 Capital Gains Reporting is applicable to holdings within the General Investment
Account (GIA) product wrapper. It does not apply to SIPP, ISA or Offshore Bond
product wrappers. If a client has more than one GIA, reports will be available for
each GIA product wrapper they hold.
 The tool will initially cover realised and unrealised capital gains and losses arising up
to the end of the 2010/2011 tax year, as defined by HMRC.
/ Capital Gains Tax
Capital Gains Reporting provides indicative reports that can be used to help identify gains or
losses that contribute to an individual’s CGT position. Capital Gains Tax and reporting it to
HMRC remains the responsibility of the individual client – Novia does not provide tax advice
or details of any CGT that may be payable. Whilst Novia is able to provide details of gains
and losses realised via the service a client may have holdings elsewhere that impact an
individual’s CGT position – clients and Advisers should always seek advice from a tax
professional if they are at all unsure of their position.
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the gain or profit made from something that you own,
such as investments or property that is sold, given away or otherwise disposed of. There's a
tax-free allowance and some additional reliefs that may reduce a Capital Gains Tax bill and sometimes there may be no tax to pay.
An asset is usually disposed of when you cease to own it - for example if you sell it, give it
away or otherwise transfer it. It's the gain made - not the amount of money received for
the asset - that's taxed.
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Gains above the annual tax free allowance are taxed at the current prevailing rate – please
see the HMRC website for details of this.
HMRC provides information and guidance on Capital Gains Tax – further details are
available from their website at www.hmrc.gov.uk or your local tax office. For advice on CGT
and all other taxation matters please speak to a tax professional.
Some further useful detail on CGT from HMRC is reproduced later in this document – please
see below.
/ How Capital Gains Reporting works
Capital Gains Reporting provides two reports to aid an adviser and client work out the
gains/losses that have, or could, be made.
 Realised Gains – this works out all gains/losses made through sales of investments
in the period selected
 Unrealised Gains – this works out potential (unrealised) gains/losses that could be
made if the holdings were sold
Both reports work out gains/losses in the same way and take into account investments
purchased and transferred (re-registered) into the product wrapper.
Identifying investments sold
Capital Gains Reporting calculates how much gain or loss has been made if and when an
investment held via a Novia GIA is disposed of. The tool determines the difference between
the proceeds received for the sale of the investment minus the cost of the investment when
it was acquired. This means the investment sold has to be linked to it’s purchase and
therefore the purchase cost, to work out the difference between proceeds received and cost
of the assets being disposed of.
There are some specific rules as to how this must be identified – based on when the sold
investment was purchased/acquired. The Capital Gains Reporting tool takes into account
the three main rules as set out by HMRC which determine the basis of the gain or loss
made. When an investment is sold the tool will identify the purchase in the order
determined by HMRC which is as follows:
1. Investments acquired on the same day (the same day rule)
2. Investments acquired within 30 days following the day of sale (bed and breakfasting
rule)
3. All other investments in the ‘pool’ of holdings (section 104 holdings – all other
holdings of the same investment which do not fall into the above categories).
The Capital Gains Reporting tool will detail which of the above rules forms the basis for the
gain/loss calculation for each holding/disposal. For same day and 30 day rule holdings the
actual cost for those units/shares is used and for pooled holdings the average cost of the
units/shares held is used. The Realised Gains report will show the matching method used
for each disposal.
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Re-registered holdings
 Capital Gains Reporting takes into account investments re-registered (in-specie
transfers) to the product wrapper.
 As a default the tool will use the price as at the date of transfer to calculate the cost
of the holding – however an Adviser can enter the original cost of the assets if this is
known via the ‘Enter Transfer Cost’ functionality. This will be saved and used for all
future calculations – the report will show if the price has been entered.
Equities held through a Novia Stocktrade Account
 These are included in the tool as per other investments held in the GIA product
wrapper.
Prices of investments used by Capital Gains Reporting
 Details provided by the Capital Gains Reporting tool are based on prices provided to
us by Financial Express. The reports generated by the tool will be based on the last
price we have received as at the date shown on the report. Any report generated will
show the date of the price used.
Distributions
Capital Gains Reporting takes into account distributions received for investments held and
will adjust the holding as appropriate. Accumulation units/shares will result in a notional
distribution where the value of the holding is increased.
Investors have the choice of two types of unit; Income & accumulation. Both of which are
charged to income tax. Accumulation units are rolled up income within the same unit,
therefore this aspect has already been taxed as income.
The Novia tool is, unlike others in the market, sufficiently sophisticated to be able to
differentiate the part of the unit that has already been taxed (the accumulated part through
income roll up) at disinvestment stage.
Without this feature, the investor could potentially end up paying CGT (in addition to the
income tax already paid) on the whole unit and therefore paying tax twice.
 Equalisation is treated as a return of capital and so will show as an adjustment to
the holding.
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Unrecognised Transactions
 If the Capital Gains Reporting tool cannot recognise a transaction type you will be
asked to contact Novia Client Services. Client Services will then provide support to
resolve the transaction type and assist you in generating the report.
/ Accessing Capital Gains Reporting
 Capital Gains Reporting is available to all Adviser firms using the Novia platform –
and there is no cost for doing so.
 The tools can be accessed via the Novia secure extranet - No further login details are
required.
 Both Advisers and paraplanners within a firm can access the tool.
 Advisers will be able to select and view reports for all of their clients on the Novia
platform.
 Paraplanners will be able to view reports for all clients of the Adviser they have
currently selected to view. They will be able to view reports for all the Advisers they
work on behalf of.
 To access Capital Gains Reporting, login to the Novia secure extranet and go to the
Client Maintenance tab on the navigation bar. A menu of options will appear – click
on the CGT Calculator button as shown below.
 A new window will open showing the Capital Gains Reporting tool.
/ Using Capital Gains Reporting
The Capital Gains Reporting tool is easy to use and straightforward to navigate – once you
have accessed the tool it has three tabs, as shown below:
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 CGT Reports – here you can generate the Realised Gain and Unrealised Gain reports
 CGT Detail Enquiry – here you can drill down into disposals to get more detail on
the basis for the gains/losses calculated and displayed on the reports
 Enter Transfer Cost – here you can enter the original cost (if known) of
investments re-registered into the product wrapper to give the true cost of the
investments disposed of
CGT Reports
Use the first tab as shown above to access both Realised and Unrealised Gains reports.
Realised Gains Report
 To create a Realised Gains report, select an investor (you can search by name in the
Select Investor field) and then the GIA to be reported. Then enter the dates to be
reported and click Generate Report. A pdf will be generated and open in a separate
window.
 The report shows all disposals of investments held in the GIA made during the
reporting period selected. It will show the investment, disposal date, gain or loss
made and matching method used, along with notes explaining further how the
calculations are made and any further details that may apply.
Unrealised Gains Report
 To create an Unrealised Gains report, select an investor (you can search by name in
the Select Investor field) and the GIA to be reported – then select Unrealised Gain
and click Generate Report. A pdf will be generated and open in a separate window.
 The report shows the potential gain or loss that would be made if the investments
held were disposed of as at the end of the 2010/2011 tax year.
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 The report shows potential gains/losses for individual investments and then a total
for the product wrapper. It will show the investment, acquisition cost and market
value, and potential gain or loss, along with notes explaining further how the
calculations are made and any further details that may apply.
CGT Detail Enquiry
 Click on the second tab ‘CGT Detail Enquiry’ to get more details of how gains/losses
are calculated. This enquiry screen allows you look at disposals made in the GIA
selected and then to look at the acquisitions matched to that disposal.
 Select an investor (you can search by name in the Select Investor field) and the GIA
to be reported. Click in the Select Investment field to bring up a list of investment
holdings in that product wrapper. Selecting an investment will display details of
disposals and matched acquisitions.
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 The screen will display the disposal date, units, proceeds, type of transaction (eg
disinvestment, re-registration) along with acquisition costs and the gain/loss. The
acquisition matched to the disposal will show the acquisition date, units, cost, type
of transaction along with any remaining units and the cost of these units.
Enter Transfer Cost
 Click on the third tab ‘Enter Transfer Cost’ to enter the acquisition cost of any reregistered investments held in a GIA.
 Select an investor (you can search by name in the Select Investor field) and the GIA
to be reported – this will generate a list of any re-registered investments held. The
screen will display the date the investment was received by Novia, the investment
name and SEDOL, units now held and the market value. The acquisition cost can
then be entered if this is known - this must be the total acquisition cost.
 Where the transfer cost is not entered, Capital Gains Reporting will use the market
value on the date received by Novia as the acquisition cost for the investments.
/ Support and Further Information
 If you require further support using Capital Gains Reporting or have any queries
regarding the tool please contact Novia Client Services on [email protected] or 0845 680 8000.
 For further information regarding Capital Gains Tax please contact HMRC or speak to
a tax professional.
/ Information on CGT from HMRC
HMRC provides useful information on Capital Gains Tax for clients – further details are
available from their website at www.hmrc.gov.uk. Novia does not provide advice on CGT
and any information provided should not be relied upon - you and your clients should
always consult a tax professional and HMRC if unsure.
Some useful information from HMRC is provided below that may help your clients – this
remains the property of HMRC and all details are subject to change, prevailing legislation
and HMRC rules – you should always check the HMRC website for the latest information.
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What is Capital Gains Tax?
Capital Gains Tax is a tax on the profit or gain made when you sell or ‘dispose of’ an asset.
You usually dispose of an asset when you cease to own it, for example if you:
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sell it
give it away as a gift
transfer it to someone else
exchange it for something else
receive compensation for it - for example you receive an insurance payout when an asset's
been destroyed
It's the gain you make - not the amount of money you receive for the asset - that's taxed.
Are all assets liable to Capital Gains Tax?
Most assets are liable to Capital Gains Tax when you sell or dispose of them - whether they're in the
UK or overseas.
However, some assets are exempt, such as your car, personal possessions disposed of for £6,000 or
less and, usually, your main home.
Gifts, inheritance, divorce and Capital Gains Tax
Many events can lead to a gain or loss, besides the obvious one of selling an asset - sometimes when
you least expect it.
Gifts
Making a gift to a child - or to other people or companies - is a ‘disposal’ for Capital Gains Tax
purposes, and you'll need to work out if Capital Gains Tax is due. However, making a gift to a spouse,
civil partner or charity usually won't lead to Capital Gains Tax.
Inheriting assets
If you inherit an asset, it’s not liable to Capital Gains Tax until you sell or dispose of it. You’ll usually
need to get a valuation of the asset at the date of death when you come to work out the capital gain
or loss.
Divorce, separation or dissolving a civil partnership
When you divorce, separate or dissolve a civil partnership, you may end up transferring assets
between you. These are disposals for Capital Gains Tax purposes. Whether you're liable depends on
the date of transfer and whether you’re living together at the time.
Working out your gains or losses
When you sell or dispose of an asset, you need to work out the gain or loss on each asset separately.
You should include any allowable costs associated with acquiring or disposing of the asset, and apply
any tax reliefs.
You then bring all the individual gains and losses together to work out the overall gain or loss for the
tax year and the amount of tax due.
If you've got unused losses from earlier years - and have claimed them in time - you may be able to
deduct them too.
You only have to pay Capital Gains Tax if you have overall gains above the annual tax-free allowance
(see below).
The annual tax-free allowance
You have an annual tax-free allowance for Capital Gains Tax known as the 'Annual Exempt Amount'.
Details of the Annual Exempt Amount can be found at www.hmrc.gov.uk
If your overall gains for the tax year are above the Annual Exempt Amount, you’ll pay Capital Gains
Tax on the excess.
If your overall gains are below the Annual Exempt Amount, you won’t pay Capital Gains Tax.
Trustees, executors/personal representatives and non-UK residents
If you're a trustee or the personal representative of a deceased person’s estate - or if you aren’t
resident in the UK – visit the HMRC website to find out how to use the Annual Exempt Amount.
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Rates of tax on capital gains
Current prevailing rates can be found at www.hmrc.gov.uk
How to report a gain or loss
If you have Capital Gains Tax to pay - or a loss you want to claim - and haven't received a tax return
or letter asking you to complete a tax return, you need to contact your Tax Office.
If you normally complete a Self Assessment tax return, you need to check if your gains need reporting
(see the reporting link below). If you have gains to report or a loss you want to claim, you'll need to
complete the additional Capital Gains Tax pages and send these in with your tax return.
This document is intended to provide information for professional advisers only and is not intended for onward transmission to
clients. Novia does not provide advice - advisers must seek their own compliance/legal advice before relying on the information
provided in this document. Novia Financial plc is a limited company registered in England & Wales. Register Number:
06467886. Registered office: Cambridge House, Henry St, Bath, Somerset BA1 1JS. Novia Financial plc is authorised and
regulated by the Financial Conduct Authority. Registered No. 481600
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CGRG-0813