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  • FIRST POST
    • karimata
    • By karimata 22nd Sep 16, 5:11 PM
    • 4Posts
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    karimata
    Transfer of shares from parent
    • #1
    • 22nd Sep 16, 5:11 PM
    Transfer of shares from parent 22nd Sep 16 at 5:11 PM
    Hi

    Scenario is that my widowed father is in the process of some estate planning, and is looking to transfer his Tesco shares to myself. These have been held for many years, and the option at each dividend was to take additional shares instead of cash, so they have slowly been accumulating, probably circa £50K
    Would this be considered a potentially exempt transfer for IHT purposes, and would CGT need to be paid on transfer or is it / can it be deferred?
    Obviously the Tesco share value is relatively low at the moment so I am thinking now is the time to transfer- or they will fall entirely in the 40% IHT zone at some point in the future, and their share value will potentially have recovered as well... or as the CGT is reset to DOD is it best to leave them in the estate and not transfer them?
    My father is relatively elderly, so any potential exempt transfer would be 'a very good innings indeed'

    Thanks-Jim
Page 1
    • xylophone
    • By xylophone 22nd Sep 16, 6:11 PM
    • 18,399 Posts
    • 10,318 Thanks
    xylophone
    • #2
    • 22nd Sep 16, 6:11 PM
    • #2
    • 22nd Sep 16, 6:11 PM
    Someone of my acquaintance made a gift in hope of a PET at the age of 86 and is still in the land of the living over eight years later....

    https://www.taxinsider.co.uk/378-How_to_Avoid_Capital_Gains_Tax_When_Gifting.html seems relevant

    But current rates of CGT http://www.moneysavingexpert.com/banking/tax-rates
    • bigadaj
    • By bigadaj 22nd Sep 16, 7:09 PM
    • 7,371 Posts
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    bigadaj
    • #3
    • 22nd Sep 16, 7:09 PM
    • #3
    • 22nd Sep 16, 7:09 PM
    Assuming he's not a multi millionaire that's sum in a single company
    looks unwise.

    Would be better to diversify, just look at lloyds, bp etc
    • MoneySavingUser
    • By MoneySavingUser 22nd Sep 16, 9:58 PM
    • 1,501 Posts
    • 596 Thanks
    MoneySavingUser
    • #4
    • 22nd Sep 16, 9:58 PM
    • #4
    • 22nd Sep 16, 9:58 PM
    Someone of my acquaintance made a gift in hope of a PET at the age of 86 and is still in the land of the living over eight years later....

    https://www.taxinsider.co.uk/378-How_to_Avoid_Capital_Gains_Tax_When_Gifting.html seems relevant

    But current rates of CGT http://www.moneysavingexpert.com/banking/tax-rates
    Originally posted by xylophone
    There won't be any gift relief available for CGT purposes as for a quoted company you need to own at least 5% of the company's shares (unless the assets are disposed into a trust and become immediately liable to IHT I think).

    As transfers between connected persons are at market value he could gift £11,100 of shares to his son each year to use up his CGT annual exemption (assuming he isn't already using it), however I think they would still be a PET unless the son actually pays for them at market value - but then you have the same problem in that the father has assets in his estate that he wants to get rid of!

    Maybe he can sell the shares and give you cash each year and make use of the various exemptions i.e. £3k per year, £250 to anyone etc. https://www.moneyadviceservice.org.uk/en/articles/gifts-and-exemptions-from-inheritance-tax#how-much-is-the-annual-gift-allowance

    ===

    What is the total value of his estate?
    Did your mother leave her estate to him? Did she use any of her nil-rate band?
    Will he benefit from the main home extension? http://www.ashfords.co.uk/passing-on-the-family-home-the-new-inheritance-tax-allowance/
    • xylophone
    • By xylophone 22nd Sep 16, 11:05 PM
    • 18,399 Posts
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    xylophone
    • #5
    • 22nd Sep 16, 11:05 PM
    • #5
    • 22nd Sep 16, 11:05 PM
    http://www.telegraph.co.uk/finance/personalfinance/tax/11975719/Im-giving-shares-to-children-to-reduce-dividend-tax-who-must-pay-tax-on-capital-gains.html

    Another option is to give the shares to your children. But there will be capital gains tax (CGT) to pay when the gains exceed £11,100, said Sarah Lord, a chartered financial planner at Killik, the stockbroker.
    “The tax treatment of gifting shares to children is different to the treatment of gifting to a spouse of civil partner,” Ms Lord said.
    “The gift to children is classed as a disposal for tax purposes, and therefore, if there is a capital gain, CGT could be payable. It would be payable by yourself, not your children. It is payable on the profit or gain at the point at which you gift the shares to your children.
    “The gain is usually the difference between what you originally paid for the shares and the amount that you gift them for, remembering that you would need to transfer the shares to your children at full market value.
    “You cannot deduct a loss from giving, selling or disposing of an asset to a family member unless you are offsetting a gain from the same person.
    “If you were to gift the shares to a spouse or civil partner the treatment would be different in that there would not be CGT payable at the point of the gift but tax could be chargeable if there is subsequently a gain when the asset is disposed of. The gain would be based on the original acquisition cost.”
    • Keep pedalling
    • By Keep pedalling 23rd Sep 16, 12:41 AM
    • 1,936 Posts
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    Keep pedalling
    • #6
    • 23rd Sep 16, 12:41 AM
    • #6
    • 23rd Sep 16, 12:41 AM
    If you look at the Tesco share price over the last 16 years it is highly unlikely that there is any gain as they are currently very near the lowest value over that period and it is almost certain that there would actually be a significant loss, so I don't think there will be any CGT to pay.

    Rather than transfer I would cash them in so that you could invest the money in something with far greater diversity.
    Last edited by Keep pedalling; 23-09-2016 at 8:27 AM.
    • AnotherJoe
    • By AnotherJoe 23rd Sep 16, 9:17 AM
    • 3,481 Posts
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    AnotherJoe
    • #7
    • 23rd Sep 16, 9:17 AM
    • #7
    • 23rd Sep 16, 9:17 AM
    OP, you are asking the wrong question.

    Start with the fundamental one, if you had £50,000 to invest, would you buy Tesco shares with that?
    Few would (otherwise they wouldn't be at such a low point !! )

    So unless you have a particular desire to sink such a significant amount of your savings into one company, as KP above says, why not have him sell the shares and give you the money, and then you can invest it in a way that's appropriate for you?
    • Malthusian
    • By Malthusian 23rd Sep 16, 10:35 AM
    • 939 Posts
    • 1,256 Thanks
    Malthusian
    • #8
    • 23rd Sep 16, 10:35 AM
    • #8
    • 23rd Sep 16, 10:35 AM
    The worst case scenario is that your dad gives you all the shares now, paying 10% or 20% tax on any gains above £11,000 (which may not be much if anything, as others have said), then pops his clogs the day after, which means the gift is added back to his estate and you pay 40% tax on top.

    Selling sufficient shares to use his capital gains allowance and giving you the cash to invest in the most appropriate manner for your circumstances may be the most sensible move all round.

    There are investments which are exempt from Inheritance Tax if held for two years - which gives much better odds of survival than the seven years required for PETs. But they are extra-high risk and illiquid and should be taken out with professional advice. Similar to these - but even higher risk and often with a real possibility of total or permanent loss - are Enterprise Investment Scheme investments which share the two-year Inheritance Tax exemption, and you can also defer capital gains tax on investments you dispose of in order to buy EIS. However, again high risk and not to be considered without professional advice. With £50,000 and likely relatively little in capital gains to roll over (as per above comments on Tesco's share price) EIS is unlikely to be worth it.
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