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CGT - Stockbrokers Throwing Caution to The Wind?

Spousal Quoted Share Transfer: Immediate Donee Share Sale - Not What We Used to do in Good Old Days!

Just got a few minutes spare and noticed this AGAIN on stockbrokers quoted shares CGT Report.

In the good old days we used to advise (husbands usually back then) to gift shares to wife and then get wife to sell on after a year to use her annual CGT exemption.

This strategy was borne out by comments in (I think) the old Tolleys CGT books (and/or maybe Simons). There definitely was a quote in one of the textbooks about the donee sitting on the gifted shares FOR A WHOLE YEAR before (she, back then) sold them on.

Now we used to wonder where this "one year" holding period came from. Certainly not in the statute. But we got the message: "Do not sell the gifted shares immediately after the gift".

Lest what? Good question! Maybe lest Inland Revenue (back then) decided to say the wife's sale was in fact deemed to be the husband's and added her gain back on top of his?

Well, that never happened. In the umpteen decades of practice I have only ever seen one single occasion when the Inland Revenue queried a stockbroker sale (and it was not for a gift situation).

So, (and I have seen it many times over the last few years) I have a few minutes ago seen a case where (wealthy) wife transferred on stockbroker's advice a quoted shareholding to husband on 19 April 2017 followed by an immediate sale by husband on the same day.

So what is the big worry? Could HMRC now say that the husband's sale was actually the wife's. And why did the old textbooks say wait a whole year after gift before selling on.

Was it author paranoia or was/is there a genuine threat of some HMRC sanction. Certainly in MTD more transactions like this will be picked up.

 

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21st Jan 2019 12:48

The last time this issue came under close scrutiny was, I believe, in 2008 when indexation for individuals was scrapped. There was a lot of nonsense (in my view) spoken on the matter of using spousal transfers to "bank" indexation.

My recollection is that HMRC made it clear that where a transaction took place it would be recognised for CGT purpose in the normal way and subject to the normal rules -it did not comment of the daft "wait three months or year before undertaking a further transaction" approach being touted at the time - and quite rightly so!

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21st Jan 2019 13:05

The text books would have mentioned such risk from an abundance of caution re Ramsay preordination, but now Ramsay has been clarified as not meaning preordination per se (it just means the purpose of tax law - interpreted for HMRC's benefit as much as possible of course by HMRC biased judges) all should be fine re CGT annual exemption in my view (as HMRC accept equivalent H&W IHT deathbed planning works in their GAAR guidance).

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to Justin Bryant
23rd Jan 2019 06:44

Grandad remembers Penelope Pitstop in black and white. I wouldn't comment on a lady's age but possibly some of this memory is pre-Ramsay.

The only danger I can see is if the proceeds stay in Mrs's account, and husband is just selling on her behalf. If the shares are transferred to his portfolio and the proceeds reinvested there, I see no "lest".

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By DJKL
to Tax Dragon
23rd Jan 2019 10:00

Black and White- surely not- it was more pretty in pink

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to DJKL
23rd Jan 2019 10:55

A lot of what looked black and white in Granddad’s day has become more, shall we say fluid, now. Pink was just the start of it.

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