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Minority Discount for CGT

Gift to conected person, can we discount the value for a minority shareholding

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Father wants to gift his 25% share in an investment property company to a company owned in equal shares by his adult children.

There is a CGT implication as the market value of the shares have increased in value since purchase.

As they are connected persons for CGT market value will apply but could I still apply a discount for it being a minority share?

Please ignore IHT in any response.

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By The Dullard
06th Feb 2020 12:18

You could... if you're sure that dad's not going to gift any more shares in the company to to any connected persons during his lifetime, as TCGA 1992, s 19 great at biting you in the @r5e.

Don't ignore IHT in real life, btw. Discounting definitely applies for IHT purposes, and IHT valuations have their own unique way of biting you in the @r5e, because of the discounting. Hint: falling from 100% to 75% is less significant than falling from 95% to 70%.

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By johngroganjga
06th Feb 2020 12:30

Remember that the quantum of the discount will be less because it is an investment company than it would have been if it was an active trading company.

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By Tax Dragon
06th Feb 2020 17:16

A gift to a company?

I'm OK with the IHT... sorry, wasn't supposed to mention that, though it helps with the CGT... I'm stuck on the CT position. Can anyone help?

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By David Heaton
06th Feb 2020 18:06

Who owns the other 75% of the investment property company? He's clearly 'connected' for s286 TCGA purposes to the donees, ie, his sons and their company, but are he and they already connected as far as the 25% shares are concerned, or is he just a minority shareholder among unconnected shareholders, giving away his minority interest to family members? It's the connections in his company that you need to look at when considering whether it's a minority holding. If the sons and their connected persons are also shareholders there, the father is deemed to own more than 25%.

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By Montrose
10th Feb 2020 14:40

If father's only shareholding is 25% , then for CGT purposes the valuation appropriate for a 25% holding in a property investment company will apply.

In calculating that value SVD will look to guidance from the appropriate DV[s] to establish asset values. The extent to which SVD will accept a reduction for contingent CT on unrealised gains may require evidence of the likelihood of disposing of the investment property.

Another factor which may reduce the discount is the likelihood that the shareholders will in practice act together-more likely if the shareholders are a family.

Once DV's are involved the valuation process can draw out over many months

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