HMRC have issued Revenue & Customs Brief 16/09 which outlines the CGT treatment for former shareholders of Bradford & Bingley plc on the transfer of its shares into public ownership. The Brief also outlines the income tax and CGT position of those who held shares and share options under employee share schemes.

Capital Gains Tax

HMRC consider that the entire loss to the shareholder of his shares under the Transfer Order is a disposal under section 24(1) of the Taxation of Chargeable Gains Act 1992. The time of the disposal will be 29 September 2008, the date the Transfer Order came into force, which falls in the tax year 2008–09.

As no consideration was received for the shares, the disposal on 29 September will normally give rise to a loss. Any payment under the Compensation Scheme Order will be chargeable to CGT as a capital sum derived from the recipient's former shareholding. The charge to CGT will arise in the tax year in which the compensation is received.

Losses arising under section 24(1) TCGA can be set against chargeable gains in the usual way. The latest date for claiming losses arising in 2008-09 is 31 January 2015. Where a former shareholder has not claimed a capital loss under section 24(1) TCGA, any allowable costs incurred in acquiring the shares may be deducted from the compensation in arriving at the gain arising under section 22(1)(a) TCGA.

Employee share schemes

There may be income tax consequences for shares and share options held by employees under employee share schemes.

Employees with a savings contract under the Save As You Earn scheme, may continue paying monthly contributions into their savings scheme. When the three year or five year contract expires, they can receive their savings with a tax-free bonus. They will no longer have an opportunity to exercise an option and buy shares at the end of the contract.

For full detail on the tax treatment of Bradford & Bingley shareholders and employees, see http://www.hmrc.gov.uk/briefs/cgt/brief1609.htm. A questions and answers section is also available at http://www.hmrc.gov.uk/news/bb-plc-cgt-qas.pdf.

In addition, HMRC have produced guidance on the treatment of Bradford & Bingley shares for the purposes of Inheritance Tax relief when the company was taken into public ownership at http://www.hmrc.gov.uk/cto/iht/bb_shares.htm