You are here:

Capital gain

Created:
23 September 2008
Updated:
1 October 2008
Written by:
Bernard Jones

THURSDAY 4 SEPTEMBER - Making a connection

Elevenses: Just about to tuck into an orange Club biscuit when Dot rang up. She's in a bit of a flap. Her TV doesn't work, again.

'Is it plugged in?' I ask.

'Yes, that black thing is pushed into that white thing.'

'The black TV flex and plug, with the three pins, is definitely plugged in?' I know from previous experience not to take any knowledge for granted.

'But it's still not working.'

Advertising

So I drive all the way round to Isleworth, a three hour round trip in appalling traffic, and discover that while my mother's TV plug is indeed connected to the white gang socket, the gang socket is not plugged in to the wall socket.

'For God's sake. You know that has to be plugged in, too.'

'Oh, does it need them both?'

'Of course, Mum. The electricity comes out of the wall. You remember, like I explained before?'

'Well, I only did it so I could push the carpet sweeper around. There's no need to make such a fuss. I'll put it in now.'

'Yes, but I've had to drive nearly a hundred miles to show you, didn't I?' Oh, this stupid woman will be the death of me.

FRIDAY 5 SEPTEMBER - Letters pray

On the stroke of ten, Dot rings again. This time she's had some letter with a big form in it, and doesn't understand it. Not surprising, seeing as she's lost her reading glasses again. However, after yesterday's fiasco, I refuse to drive all the way over just to read it for her. This, I'm sure can wait until Saturday, when I am due there in any case to pick up Maurice, the mobility vehicle, after his repairs.

SATURDAY 6 SEPTEMBER - Tax bombshell

I drive around to Isleworth it the drizzle. It occurs to me that I could start an airport taxi service, ferrying guests between Heathrow and Gatwick for £100 a time, which would at least help defray the costs of wet-nursing my mother.

However, it turns out I was wrong to be so dismissive of the letter. It is from HMRC, enclosing a tax return and a letter giving her a month to fill it in. This is extremely odd. I'm sure the taxman knows her age, and there aren't many 92 year-olds who need to fill out a self-assessment. I sit and cogitate over this for a while while Dot feeds me some chocolate cake and tea. I pick up the form again and take a closer look. Ah! It isn't for the current tax year, but for 2007-08. Suddenly I almost gag on my cake. It must be related to the sale of BAE Systems shares, advised by Mary Asterby of the Women's Institute. That would have been an almighty transaction.

'What's the matter, Bernard?' Dot says.

'I think you may have to pay some tax, quite a lot.'

'On me pension? I've never had to...'

'No, Mum. On those BAE shares that Mary Asterby helped you sell last year. Would you mind if I looked at the paperwork?'

Dot, who has consistently accused me of trying to get her money for myself, gives me a sharp look. Then she shuffles off, roots through a cupboard, and comes back with her stockbroker statements folder. I flick through and see that a sale of 142,930 BAE shares at £4.51 took place in May 2007. Good grief, that’s £644,614. Worse still, because it was in the last tax year it will attract a capital gains tax rate of 40 per cent, not the new rate of 18 per cent. Assuming the cost of acquisition back in 1938 was negligible, we're talking about a bill of around a quarter of a million!

Looking over the current state of the account, which is heavy on retailers and cyclicals, it looks like the bulk of what is left may have to be sold. I'll have to take this home to look over the current prices, but M&S, Laura Ashley, Carnival Cruise Line and British Airways are all well down from a year ago. The only resilient shares I would imagine are hip-joint maker Smith & Nephew, and funeral firm Dignity. Care UK, which should be have been recession proof has been a bit of a disaster, or so I hear. The current value, according to the August statement was £363,219.

SUNDAY 7 SEPTEMBER: Calculator time

A thoroughly depressing morning number-crunching. My mother's shares were worth just £317,462 on Friday. If the tax bill is anywhere near as high as I fear, there will only be just over £60,000 left. That, together with the remains of the DotCom commodities fund will just about get my inheritance over £100,000. And to consider the work I have put in to try to make this work for the whole family. If only Dot had not sold gilts to give Jem that £150,000. If only she had sold a few shares each year like I told her. If only the stock market was enjoying a boom year. If only...

MORE FROM THE SAGE OF SUBURBIA...

Read more of Bernard's musings at his IC home page.

Write to him at bernard.jones@ft.com

You can buy the two Bernard Jones books at a discount in the IC bookstore.

  • Back to top

Products and Services from Barclays Stockbrokers.

The UK’s No.1 Stockbroker

Stocks and Shares

Contracts for Difference

Financial Spread Trading

Gilts and Bonds

Funds Market

FX

Education Centre

Trading Simulator

Advertorial Feature

Spread your risks with spread trading

With so many big moves in the world's financial markets, there have seldom been more opportunities around for spread traders. Isn't it time you joined them?

by Dominic Piccarda