Backdating capital gains tax

16 May

In particular, claims cannot be made once the asset has ceased to exist Claims can be backdated for up to two tax years.

In some cases, losses from them can be set against taxable income, instead of gains Negligible value claims can be useful in reducing an individual’s tax liability if they own assets that have become worthless since their acquisition. Companies may also make negligible value claims on chargeable assets but this article deals solely with the personal tax aspects of such claims.

In much the same way that backdating is now prompting some companies to restate, corporate tinkering with options can damage the personal equivalent of a financial statement: your tax return.

Backdating — setting the grant date of an option earlier than the actual date it is granted, typically in order to take advantage of a lower stock prices — can create tax implications for the recipient, as well as the company.

In October, the allowances for those aged 50 or over were raised to £5,100 for a cash ISA and £10,200 for a stocks and shares ISA and these annual limits will apply to everyone from 6 April 2010.

If you haven't already invested in an ISA this year, you could invest before 5 April up to your limit and again after that date up to the 2010-11 tax year's ISA limit, giving a total investment of up to £17,400 per person (£20,400 for the over-50s) or £34,800 (£40,800 for the over-50s) per couple.

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They save an extra 20% of tax on interest and avoid a higher-rate tax charge of 22.5% of gross dividends (25% net) on shares. If you invest in both types, your overall allowance is still £7,200.In some instances, it can result in underpayment of income at the ordinary income tax rate and overpayment of capital gains taxes, which carry different rates.For example, say a company board meets on January 30, 2003, when the company’s share price is , and decides to grant an employee a stock option with a date of January 1, 2003, when the stock was .When a taxpayer makes a negligible value claim, they are treated as if they had sold the asset and immediately reacquired it for its value at the time the claim is made.This results in a capital loss that the taxpayer can set against capital gains and, in some cases, income.If a company has been dissolved, no negligible value claim can be made.In effect, the shares ceased to exist at the dissolution of the company, so can no longer be said to be in the taxpayer’s possession.Anyone, regardless of their income, can invest a gross amount of £3,600 a year in a pension, and it's possible to invest in a pension for a non-working spouse or a child.The cost to a basic-rate taxpayer of a £3,600 contribution is £2,880 - you deduct 20% basic-rate tax from the investment.'I've been thinking of restructuring my portfolio,' he says.'Most properties are let to tenants who claim housing benefit, but there have been problems about getting paid the rent and I want to sell some of these and move up-market.' But any sale could see 40% or more of Paul's profits snatched by the taxman. The couple live with Liz's son Howell, 16, and their daughter Amy, 6, in Ilkley, West Yorkshire.