Shares - Can I Claim Back Tax?

Q.

A few years ago I had some shares. I sold them and obviously was prepared to pay tax on them.

The shares dropped in value substantially as I was selling them; however, the tax man charged me tax on the original higher share price. In fact on money I never received. Is this right, and is there anyway I can get some money back?

A.

When shares are sold they may attract a Capital Gains Tax (CGT) charge. A CGT charge will apply when shares are sold at a profit, and that profit exceeds a certain threshold. In the first instance, it should be remembered that CGT charges do not arise when you dispose of assets with a value of less than £6,000.

However, for assets over this value that are disposed of at a profit (the sum for which you sell them exceeds the total of the sum for which you bought them, plus the costs of acquiring and disposing of those assets) a CGT charge of 18% for the tax year 2008-09 will apply.

The particulars of your case are confusing. You mention that the value fell “as you were selling them”. Clearly, share prices can fluctuate on a minute-by-minute basis. However, any CGT liability would apply to the amount received by the individual selling the assets. As such, it would appear that you have indeed been charged too much tax.

Broker Practices

More confusing is the fact that you did not receive the value of the shares when they were sold. It would appear that your dispute may be with your broker, rather than the tax man. Many brokers will take care of the tax liabilities associated with the sale of shares; they have automated processes by which CGT will be deducted from the amount that you actually receive. This can sometimes result in individuals paying more tax than they should; you may be eligible for taper relief, or be able to offset other losses against CGT chargeable gains. In these cases you will probably need to reclaim your tax via self assessment.

In your case, however, it would appear that there may have been a more basic error made on the part of the broker. They may have calculated the amount that you should be paid based on the share price when you asked for them to be sold, rather than the price at which they were actually sold.

You should check the time at which they were actually sold, as you will not be able to appeal to the tax man without full knowledge of the sale price.