1982 Pool Transactions

Individual Transactions

The first method is to write up the full history of acquisitions and disposals. The acquisitions should have the 1982 Market Value completed. If the field is left blank on the transaction then the application uses the 1982 Price on the security. The 1982 Price is the price of a share as it originally stood at 31/03/1982, i.e. not adjusted for subsequent capital events. However, using the 1982 Price is not fool-proof. Suppose company A has taken over company B since 1982 and there were 1982 transactions on company B. In this case, the capital history needs to be written up on company A but company A’s 1982 Price is not relevant for these transactions. So, CCH Software recommend that the 1982 Market Value is completed on the individual transactions.

A Single 1982 Pool Transaction

The second method is to write up the entire 1982 pool as a single pool transaction. This can be accomplished using a P82 movement code:

The A7 rule means that the transaction is indexed from the Transaction Date even where a CGT Override Date has been specified. This allows the indexed cost to be taken on. The transaction date is typically 05/04/1998 and the CGT Override date is 31/03/1982. The taper relief is calculated using the CGT Override date in the usual way. So, the extra year for taper relief is allowed. The fields are filled in as follows:

• The P82 transaction does not have a 1982 Market Value field. This is because, with an A7 rule, the 1982 value is ignored if the transaction date is after 31/03/1982. This is why the CGT Override Value is filled in with the indexed cost of the higher of the original cost and the 1982 Market Value. However, using the higher value is not always correct for CGT. For instance, if the securities are sold at a loss then the lower value is the correct CGT cost. This is an application limitation. Similarly, if the original cost would give a gain and the 1982 value would give a loss then the shares should be disposed at ‘no gain, no loss’. But, with no 1982 value the application cannot make this comparison and a disposal would show a loss. In most cases, 1982 acquisitions are sold at a large profit; in which case these cases are not a problem. However, where a share has made little progress since 1982 and the problem does arise, there are three ways around the problem:
• Enter the individual transactions instead of a pool transaction.
• Enter a single 1982 pool transaction using an A1 rule code. This is unindexed and carries both the original cost and the 1982 Market Value. The transaction date is 05/04/1998 or whenever the pool was taken on, and the CGT Override Date is 31/03/1982. This method allows the application to switch automatically between the original cost and the 1982 Market Value as appropriate. It can be useful when unindexed data is available as at 1982. Where there were subsequent rights issues, these need to be entered separately so that their indexation is correct. So, although this method is more accurate, it requires more entries than a P82 entry when there were subsequent rights.
• If the shares are sold at a loss from the 1982 pool, make a retrospective adjustment of the CGT Override Value to set it to the correct CGT cost.

Most users either enter the individual transactions or a single indexed P82 transaction.

• For historical reasons, Trust Accounts treats 31/03/1982 and 05/04/1982 as equivalent dates.
• The CCT Wizard has certain limitations in dealing with 1982 transactions:

1. When the cost is transferred to a new security it uses P82 entries which, as explained above, give an incorrect result if the security is sold at a loss and may give an incorrect result if the security is sold for ‘no gain, no loss’. Where a P82 is sold at a loss, it is advisable to check the calculation and adjust the CGT Override value if necessary.
2. If an old complex capital event is processed that occurred before 05/04/1988, the Wizard may give an incorrect answer even if the security is sold at a profit. This is because of the way the Wizard works. The Wizard processes a notional disposal on the date of the complex capital event. The whole holding is notionally sold for a large sum. The Wizard then processes the cost that was matched to that disposal. Before 05/04/1988, rebasing of cost did not exist (although the indexation was based on the higher of the cost and the 1982 value). So, when the 1982 value was higher the cost transferred to the new holding in the P82 entry was always based on the original cost. If the security is sold after 05/04/1988 the application can only use the original cost figure, since the 1982 market value figure is not available in the entry.