For those with shareholdings in Northern Rock Bank, 2008 was probably a year they would rather forget. However, HM Revenue and Customs (HMRC) has issued a guidance note (Revenue & Customs Brief 32/08) dealing with the Capital Gains Tax (CGT) position resulting from the transfer of the shares into public ownership.
Where the disposal was made at nil value, as was the case for some shareholdings, the allowable loss for CGT will arise in the 2007/2008 tax year. Where compensation is paid, the allowable gain or loss will arise in the year in which the compensation is received.
Tax law requires you to deduct the allowable losses arising in a tax year from the total chargeable gains for the same year, even if this results in chargeable gains after losses below the level at which tax would be payable. For example, if you have made chargeable gains of £16,000 (more than the annual allowance) and make a CGT loss of £12,000 in the same tax year, the whole of the loss must be deducted from the £16,000, leaving a net gain of £4,000 which is less than the annual allowance; and it cannot be carried forward. Unrelieved losses are carried forward, however, and are available to be deducted from chargeable gains in future years. In the case of losses brought forward, a claim may be made to restrict the loss claim to an amount which brings the taxable chargeable gains down to the annual allowance. Any balance of unrelieved losses brought forward is carried forward again to be deducted from future chargeable gains.
If net losses of £2,000 are made for example, these can be carried forward until a tax year when a CGT charge arises and will operate to reduce that charge (by £2,000 multiplied by the effective rate of CGT).
Where shares are owned under employee share schemes, there may be Income Tax consequences.
HMRC has published a short guide to Capital Gains Tax.