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  • RE: Taxation of Short Box Spread Options

    Thank you for the reply. ITTOIA05/PT4/CH12 has been repealed by the Finance Act 2013 and replaced with ITTOIA05/PT4/CH2A. This new chapter states: "The person liable for any tax charged under this Chapter is the person receiving or entitled to the return or the part of the return." As the short seller of a box spread (that acts as a borrower), is not receiving or entitled to a return that is "economically equivalent to interest", then it appears as if the rules do not apply to the seller under the new legislation and ordinary CGT rules apply to each option in any short box spread. However it appears, the purchaser (long position) of the box spread would be subject to income tax as the return is akin to interest.
  • RE: EIS: "I have already claimed Income Tax relief for the relevant year(s)"

    I managed to get through on the phone and I've been told that those boxes should only be checked when filling in the particular section if relief has already been claimed by any investment for the same tax year(s) being claimed for.
  • EIS: "I have already claimed Income Tax relief for the relevant year(s)"

    Hello, I see that the EIS claim forms now have "I have already claimed Income Tax relief for the relevant year(s)" and "I have already claimed deferral relief for the relevant year(s)". When should they be ticked? Should they be ticked if a claim has already been made for the same UIR? Or should they be ticked if a claim has already been made for the same tax year by any investment? Should they only be ticked when making a claim in the particular section. For example, can the Income Tax relief box be ignored if only claiming deferral relief? Thank you.
  • Taxation of Short Box Spread Options

    Box spreads are options combination strategies with guaranteed pay-offs upon exercise. I'm aware that the payoff from buying a box spread is subject to income tax due to the legislation on "disguised interest". However, the legislation and guidance does not provide any mention of the borrowing party in any "disguised interest" arrangement and therefore has no obvious relevance to box spread sellers. Selling a box spread involves buying a put and selling a call at a lower strike, and buying a call and selling a put at a higher strike with all legs having the same expiry. When selling/shorting a box spread, a credit is provided that effectively results in the seller borrowing from financial markets. Is the taxation of such an arrangement handled differently from other options? Or are each of the option legs treated separately with CGT calculated in the normal way? If the latter is true, my understanding is that each long leg for a cash-settled financial option is calculated by using the option premium (plus associated fees) as the acquisition cost and the sale proceeds or received payment upon exercise as the disposal proceeds. The credit from short legs are considered an immediate capital gain equivalent to the credit received which can only be adjusted once exercised or repurchased (position closed). The cost to close a short position or upon exercise can be added as the acquisition cost. As long as the position is closed before calculating CGT, the acquisition cost can be added. The disposal date is the date that the option was originally sold.
  • EIS Income Tax claim for an earlier year alongside deferral relief via self-assessment

    Hello, If I attach an EIS deferral relief claim via self-assessment, can I also make an Income Tax relief claim on the same form, or do I need to submit a separate claim via post? For example, if I wish to defer a gain made in the 21/22 year with EIS shares issued in the same year, but I also wish to claim IT relief in the 20/21 year, can I attach both claims in the 21/22 self-assessment tax return? Or can I only attach the deferral relief claim and the IT claim must be posted separately? To double check, when making a deferral relief claim, should I reduce the "gains in the year" in the CGT calculation by the amount deferred ? The notes specify: "This figure will be the gain minus any relief, claims or elections.". Thank you.