Th building is freehold with no mortgage on it.The MV is £350,000 and the gain will be £300,000.Is there any CGT to pay if he does any of the followings:
a)Gift it to his ex-wife
b)Forms a Ltd Co and the transfers it to the Co and later transfer his shares to the wife
c)Puts it into a trust whereby the wife will have the income from it until she dies and then pass it to the children.There are 5 children, aged between 5 to 23.
Any help is appreciated
Harry Mitchous
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Replies (4)
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Agree with S o G, but note that you could also set up an IIP trust and hold over the gain after the amendments in Sch 20 of FB.
Harry
Harry Ross is a tax specialist practicing in North London. He can be contacted on 020-8446 4193
One out of three
(a) If "ex" really means ex in the sense that there has been a divorce or permanent separation took place pre-6 April 2006, there will be a CGT bill because the inter-spouse exemption has gone and hold-over is not available in these circumstances on a non-business asset.
(b) CGT-liable as no hold-over election possible (see above).
(c) The proposals in the Finance Bill 2006 mean that this type of trust is "IHT-tainted " and therefore it follows that a unilateral hold-over election by the donor will be competent--- so no CGT immediately payable. However, will the client be sanguine about the IHT due on his chargeable transfer?
Need to be slightly careful...
... under the new provisions in the Finance Bill, a trust will be settlor interested if the settlor's minor, unmarried children are beneficiaries.
The consequence of this is that CGT gifts relief under s260 TCGA 1992 would not be available making the gain fully chargeable.
The solution would appear to be to ensure that none of the minor beneficiaries can benefit under the terms of the trust until they reach age 18.
As divorce is absolute, and assuming it was in an earlier tax ye
Consider settling on a discretionary trust['relevant property trust'] and claiming holdover relief. IHT will be limited to 20%of excess over £285000 [+2*3000], i.e IHT cost of ca. £11,800, and no SDLT payable.
Beneficiaries would include separated spouse but not husband/settlor and children, so no IT/CGT problem for husband.
Compared with CGT/SDLT costs of £75,000 CGT , [+£10,500 SDLT other than on gift to former wife] this is by far the cheapest solution- and legal costs are also modest.
Decennial charge on current figures ca.£3450.
Only other cost seven year insurance cover for IHT-but sum insured will not exceed £11,800 so is it worth worrying about this?