Three weeks after the preliminary results, the company posts its annual report and accounts to shareholders. This fleshes out the prelims, and underlines the success of the Country Bumpkin strategy.
The key financials also look good:
The company follows up with an upbeat trading statement for the first four months of its current financial year, and analysts start to pencil in forecasts of 20% increases in earnings per share. The shares leap to 350p.
Now, your holding is worth just over £4,000. You decide to take some profit, by selling the 142 shares which you acquired in the rights issue plus 300 of your original 1,000 holding. This realises £1,547, and leaves you with 700 shares in the company, (taking into account any commission costs).
From a Capital Gains Tax point of view, the 142 shares acquired in the rights issue have been acquired at the same cost as the shares which gave rise to the right (i.e. 100p). The acquisition cost of the 442 shares is therefore £442, and your gain is £1105 before indexation allowance. Since you held the shares at 17th March 1998, you can also get taper relief on the gain.
Whether you actually pay any capital gains tax depends on whether you have already used up your
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