Business asset query

Business asset query

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A client and his wife jointly own a property which is used in the husband's trade. I am quite happy that the wife's share only qualifies as a business asset after 5 April 2004. What if she now transfers her share to the husband? I have been told that the whole property will then qualify as a business asset even prior to 5 April 2004 but I am not convinced, having read the relevant legislation at TCGA 1992 Sch A1. Can anyone help?
Robert

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By AnonymousUser
06th Apr 2006 09:05

Read on in paragraph 15 of Schedule A1
Para 15(4) basically says that where you've got an asset other than shares, it's a business asset in the period prior to the transfer between the spouses if it was a business asset for the transferring spouse or would have been a business asset for the transferee spouse if (s)he'd owned it at the time. So you look at both spouses before the transfer and the transferee spouse after.

This is not true of shares. Para 15(4) specifically refers to para 5, which is relevant only to "other assets" and not to shares. Therefore, in the case of shares transferred from (eg) husband to wife, wife is treated as having acquired the shares when the husband did but for the period prior to transfer you can only look to see if the shares would have been business assets in the wife's hands. Therefore if the husband has a more beneficial business asset taper relief history than the wife, you lose that by transferring the shares to the wife.

Marcella Shone
Dickinson Dees

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By User deleted
06th Apr 2006 09:16

Thanks for that
Thanks Marcella. That seems to confirm that it will be a business asset even prior to 5 April 2004.

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By AnonymousUser
05th Apr 2006 21:14

But does that make it a business asset?
In looking at whether or not the asset then becomes a business asset in its entirety, you need to look at the period up to the date of transfer. If it is a business asset for either spouse, then it is a business asset for the whole period. The problem is that you are looking at a jointly-owned asset. My feeling is that the wife's share was only a business asset after 5 April 2004 and her subsequent transfer does not change that.

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By User deleted
05th Apr 2006 17:37

TCGA SchA1, para 15(4)
Where an asset is transferred from one spouse to another in a year in which they are living together, no chargeable gain or allowable loss arises (TCGA 1992, s. 58(1);
For the purposes of taper relief, the transferee spouse is treated as having acquired the asset at the date it was acquired by the transferring spouse (TCGA 1992, Sch. A1, para. 15(1), (2)). When the transferee spouse disposes of the asset, his or her holding period and the relevant period of ownership for taper relief are calculated by looking through the transfer from the other spouse to the date the asset was originally acquired by the first spouse.
[courtesy CCH]

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