LOMs potential SP?, page-64

Archertac,

Yes that is the case and correct ... assuming you are an investor for tax purposes as opposed to a share trader.

I'm assuming you are considering selling your LOMOB (or part thereof) before April 2016. If LOMOB are not sold before April 2016 and are simply exercised, this is not a CGT event and hence does not result in a capital gain.

The loss on the original LOMO options will depend on the cost of those old LOMO options and will be offset to reduce any potential capital gains on LOM or LOMOB options.

If the cost base for you old LOMO was say 5 cents, with the 1 LOMOB issued for every 2 LOMO held ... this means that you have made a capital loss equivalent to 10 cents per LOMOB (assuming you have not directly purchased any additional LOMOB options of market). Based on this, if you sell your LOMOB options for 10.1 cents (0.1 cents = purchase price of each LOMOB) or higher, this will result in a "net" taxable capital gain (ignoring all other investment capital gains or losses).

Obviously if the capital gain on the LOMOB options exceeds the loss on the original LOMO options, this will result in a "net" capital gains, which will be taxable, and the CGT 50% discount will not apply (as LOMOB would have been sold within a 12 month period. The income tax rate and charges can be as high as 49.0% (if you are in the highest tax bracket) and depends on your taxable income. Note:- A significant Capital Gain can increase your taxable income to the highest tax rate. In other words you can lose "up to" approximately half of your "net" gain (after claiming your LOMO capital loss) in income tax ... This is another strong incentive not to sell your LOMOB options and to exercise them.

By the way if you are a share trader for tax purposes, the implications are the same ... as a share trader would be unable to utilise the 50 Capital Gains Tax discount.

Hope this makes sense and answers your question.

Best wishes and hope you do well,

Zippy1