SolvedCG55054 | Conversion of securities: compensation stock: rebasing
From HM Revenue & Customs · Capital Gains Manual
If the nationalisation occurred before 31 March 1982 the taxpayer can claim relief under TCGA92/SCH4/PARA4 if the gain is released by a disposal of the gilts after 6 April 1988, see CG16980. The held over gain is reduced by one half.
Example
1970 Mr Mooney inherits 20,000 shares in Monarch Ships Ltd at an agreed value of £3 per share.
1977 Monarch Ships Ltd is nationalised. Compensation is agreed at £4 per share. This is satisfied by an issue of gilts at below par. Mr Mooney received gilts with a nominal value of £84,000.
1990 Mr Mooney transfers gilts with a nominal value£30,000 to his wife.
1991 Mr Mooney and his wife both dispose of their entire holding of gilts.
Capital Gains Tax Computation 1977
Compute the held over gain, TCGA92/S134 (2)(a)
| - | Amount |
|---|---|
| Disposal proceeds 20,000 x £4 = | £80,000 |
| Acquisition cost 20,000 x £3 = | £60,000 |
| Held over gain | £20,000 |
Capital Gains Tax Computation 1990
The transfer to the wife does not trigger a release of the held over gain, TCGA92/S134 (4). The wife inherits the liability to the held over gain.
Capital Gains Tax Computation 1991
The disposal of the gilts is exempt, TCGA92/S115. Both disposals release the held over gain, TCGA92/S134 (2)(b). The gain is halved by the operation of TCGA92/SCH4/PARA4.
| - | Amount | - |
|---|---|---|
| Mr Mooney | 54,000 | x £20,000 ¸ 2 = £6,428 |
| - | 84,000 | - |
| Mrs Mooney | 30,000 | x £20,000 ¸ 2 = £3,571 |
| - | 84,000 | - |