21. CGT: Shares and securities for individuals

Question 1

What types of shares and securities are exempt from capital gains tax? (3)

Answer 1

• Listed government securities
• Shares held in ISAs
• Qualifying corporate bonds (company debentures or loan notes)

Question 2

What are the qualities needed to be classed a qualified corporate bond? (3)

Answer 2

• Denominated by £
• Normal commercial loan
• Acquired after 13 March 1984

Question 3

What changes when shares are gifted or transferred to a connected party?

Answer 3

Market value of the shares is used as the proceeds/

Question 4

How do you calculate the market value of a share?

Answer 4

Unquoted shares - given in question

Quoted shares - mid-price of the Stock Exchange Daily Official List

Question 5

What are the share matching rules? (3)

Answer 5

Matched in the following order:

• same day as disposal
• 30 days following disposal on FIFO basis
• share pool (all shares bought prior to disposal)

Question 6

How do you treat a bonus issue?

How do you treat a rights issue?

Answer 6

Add amount of shares to share pool at £nil cost for a BONUS ISSUE.

Add amount of shares and price paid for a RIGHTS ISSUE.

Question 7

How do you treat shares when a company is taken over?

Answer 7

Remain at same value until sold.

Question 8

What is the formula for working out gains on cash received?

Answer 8

Cost or original shares (total) x (cash received/total MV of all consideration)