/ Capital Gains Reporting

Transcription

1 / 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

2 / 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 cover realised and unrealised capital gains and losses arising up to the end of the current tax year, as defined by HMRC. > The tool will also count gains and losses from previous tax years. / 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 the reporting of 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 is taxed. Gains above the annual tax free allowance are taxed at the current prevailing rate please see the HMRC website for details. Some further useful detail on CGT from HMRC is reproduced later in this document please see below.

3 / 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. 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 has been disposed. 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 its purchase and therefore the purchase cost, to work out the difference between proceeds received and cost of the assets having been disposed. 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. 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 Stockbroker 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.

4 > Equalisation is treated as a return of capital and so will show as an adjustment to the holding. 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, as well as any other Adviser with whom they work. 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.

5 / 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: > 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 reregistered into the product wrapper to give the true cost of the investments when they come to be sold. 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.

6 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 current tax year. > 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.

7 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. > 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 Transfer Cost to enter the acquisition cost of any re-registered 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.

8 > 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]. > For visual assistance please see the How to use the CGT calculator web video guide, which is available in the Video Hub section of the Secure Literature webpage. > For further information regarding Capital Gains Tax please contact HMRC or speak to a tax professional.

9 / Information on CGT from HMRC HMRC provides useful information on Capital Gains Tax for clients further details are available from their website at 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. 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: > 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.

10 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 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. Rates of tax on capital gains Current prevailing rates can be found at 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: Registered office: Cambridge House, Henry St, Bath, Somerset BA1 1JS. Novia Financial plc is authorised and regulated by the Financial Conduct Authority. Registered No CGRG-0216