CGT on spousal shares transfers

[Ldak]

Hello All

Have searched high and low and still no wiser so, before throwing the dart towards the wall holding the dartboard, thought I'd ask here for thoughts as I remembered I'd received good advice previously on another topic.

Situation is thus;

Now deceased father-in-law bought some shares in National Grid, Centrica (ex, British Gas) and Shell decade ago and must have transferred to his daughter, my (then and still) wife, with our two children "designated" on them in equal proportions. They were in paper certificate form.

There they sat, until I found them and determined that that some were defunct due to corporate actions and some were still valid.

We decided that we should transfer them to me in my name for £0 and hold them in my online GIA for easier management. They were sold into Rolls Royce shares, I know, just before Ukraine...ugh! Sum involved is ca. £5k.

With decreased CGT allowance, I feel she should "own" them herself and was wondering the most tax efficient way to transfer them to her.

If sell them in my name and give her the proceeds, the CGT will be calculated from her father-in-laws death or date of purchase I believe.

If I transfer them to her for £0, she herself will likewise be charged upon sale from her dads death or date of purchase I believe.

The thought is to not sell them but get them into an ISA in her name.

Sorry to have taken so long to get to the question but thought you might desire the background to decide liability/options.

Here it is; although a share cannot be transferred from a GIA to an ISA held by the same person without being sold and repurchased, can it be so transferred from person A's GIA to person B's ISA, or must it go to person B's GIA before being sold/repurchased after 30 days in person B's ISA?

If the latter, as I suspect, processing/trading costs, about £30, suggest fees aren't too relevant, it's the CGT liability am trying to minimise so will possibly sell tranches yearly in her GIA before moving them to her ISA.

Phew!

Any contributions thankfully received.

[scrumpyjack]

All this 'in my name' stuff is irrelevent. If you are not the beneficial owner but others have an economic interest in the shares, legally you are holding them as bare trustee for the beneficial owners.

If you are the beneficial owner, you cannot transfer them at £0 value. If you give them to someone else, you are treated as having sold them at the market value on the date of the gift and they have acquired them at that cost.

If the total value is only 5k then this is all below the CGT threshold anyway as long as there are no other disposals.

[Ldak]

Thanks Scrumpy

Should have used 'gifted' not 'transfer' I guess.

Father-in-law (FIL) legally gifted them via a J30 form as did she to me for NIL consideration (£0) so, legally, I own them. Morally, they are hers. The transfer of ownership was just for admin purposes.

Have no idea when or what the market value of the shares were on original purchase by FIL so, if I sold them, that would need to be determined would it not as that was the 'start' of the chain, value wise.

IE, if he bought them for £100 and gifted them for £0, daughter acquired them for £0 but if subsequently sold them, she have to use £100 as the acquisition cost for CGT calculation.

But as she gifted to me for £0 and if I sold them, I would need to use £100 acquisition cost, presumably.

I have no more CGT allowance left this year, hence I thought to gift them back for £0. So she could dispose in tranches going forward.

I guess your final sentence alludes to the answer.

Hope this makes sense.

[scrumpyjack]

The J30 transfer form transfers the shares but for tax purposes the 'cost' of the shares transferred to your spouse is the market value at the date of the gift. Putting £0 on the form does not change that fact. So for you the 'cost' was the market value at the date of the gift by FIL. There used to be a facility to claim 'holdover relief' but that stopped decades ago.

Gifts or transfers between spouses are not disposals for CGT purposes and the recipient spouse is treated as having acquired the shares at the original cost of the donor spouse.

[Ldak]

Ah, lightbulb just switched! Thanks.

So as long as she disposes in tranches below the CGT allowance annually going forward, it will be irrelevant what FIL paid for the shares back in the day, even going via me.

Many gracious thanks for your input.

[gryffron]

1) Transfers between spouses are not "disposals" for CGT purposes. The recipient will be deemed to have the original acquisition cost (when they were transferred from FIL). No matter how many times they are transferred between you.
2) If you sell and rebuy the same share within 30 days, you are deemed for CGT to have held it continuously. Because of the above, this "30 day rule" also applies to couples. So whether you transfer or sell-and-rebuy does not make any difference to the CGT (unless you wait >30 days)
3) Because ISAs are invisible to CGT, a transfer into an ISA is a disposal for CGT purposes. You always have to sell-and-rebuy to transfer into an ISA. In-specie transfers into ISAs are only allowed in very specific situations (like employee share schemes)

So as long as she disposes in tranches below the CGT allowance annually going forward, it will be irrelevant what FIL paid for the shares back in the day, even going via me.

That's an option. Or you could sell half each and have double the CGT allowance. Make sure they are transferred to the right name first. HMRC will not accept "They were in my name but they belonged to her" after the event. Also beware that even this Tory govt are trying to erode away CGT allowances, and Labour may do it even quicker. So CGT allowances might not be around for much longer.

Gryff