CGT of shares gifted

CGT of shares gifted

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A client of mine gifted 10% of shares in his private company to his two children (5% each), 10 years ago.

These shares were valued at the time of the gift

He and his children have just sold 100% of their shares to a third party and have made a capital gain.

Can the children take the value of the shares as the 'cost' of the shares in the CGT calculation as the gift was the consideration for the shares?

Replies (6)

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By Ruddles
03rd Feb 2016 19:33

How was the gift treated for tax purposes?

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By johngroganjga
04th Feb 2016 08:36

The point is were any gains on the previous transfers held over or taxed at the time?

If the former, the children's cost now is their father's original cost.

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Portia profile image
By Portia Nina Levin
04th Feb 2016 10:24

Bob Dylan will know where the answer is my friend.

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By Montrose
04th Feb 2016 10:36

Valued at time of gift?

There would have been different values at the same time(!) depending whether

I) IHT[ [loss to the estate'] or

ii)CGT

was in point.

Who valued the shares at the time?

For CGT usually a small minority share will be valued at up to a 90% discount to the pro rata share of the whole, so the children's base cost will have been depressed..

Most importantly, was the value  established at the date of the gift specifically agreed with HMRC for CGT purposes? If not, their approach is to reserve their position as to whether they will be bound by that historical figure..

Johngogranjga has rightly pointed out that if there was a contemporary holdover election the value at the date of the gift will be ignored

 

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By danielgricks
07th Feb 2016 18:46

More detail

The company's only asset was a property plus/minus some non-trading debtors and creditors.

The property was professionally valued and the 5% the shareholdings were valued at 60% of net assets including the professional valuation,

The members and directors passed resolutions to transfer the shares at this 60% value (£20 each)

The shares at this value were transferred in two parts, just before and just after 5/6th April which kept the capital gains in two fiscal years below the thresholds at the time (10 years ago , so no IHT issues).

There was no contemporary holdover election, does this mean the cost is £20?

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Replying to Ranse:
Out of my mind
By runningmate
07th Feb 2016 19:02

Short answer

danielgricks wrote:

does this mean the cost is £20?

Yes.

RM

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