Sale of Rights

The method of entering a Sale of Rights depends on whether the client has a nominal ledger or not.

1.  No nominal ledger - Proceeds less than 5% of the ‘remainder’, i.e. the market value of the holding after the sale of rights. Use the SRT movement code.
2.  No nominal ledger - Proceeds exceed 5%. Use the SR5 movement code.

If SRT is used, the amount should be entered as negative, as the rule code is an ‘A’ rule code. SRT causes the cost to be written down by the proceeds both for CGT purposes and for accounting purposes on the investment schedule. So, no profit or loss is created.

SR5 causes a partial disposal to be calculated both for CGT and on the investment schedule. Although the accounting rule is set to Ask SoR Treatment, the application does not currently do so. Instead, it follows the CGT treatment.

3. With a nominal ledger the movement code to use is SRG. This movement code causes the market value to be requested. The application then automatically determines whether the proceeds are greater or less than 5% and use a rule code of A4 or D3 on the entry as appropriate. This controls the CGT treatment. The accounting treatment is requested when the entry is made and can be edited subsequently on the CGT Details window.

With a nominal ledger, there is a choice of methods for entering the market value. One method is to enter the First Day Price, in which case the application multiplies the price by the holding to determine the market value. The second method is to enter the market value directly. The first method is usually more convenient if the rights are sold on the entire holding. However, the second method is necessary in more complicated situations. For instance, if the rights to some shares are sold before purchasing the rights on the remainder then the market value is the market value of the holding ex-rights plus the market value of the rights. This should be calculated manually and then entered directly.