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  • FIRST POST
    • Arpy
    • By Arpy 6th Sep 17, 1:34 PM
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    Arpy
    Dad wants to sell his shares.. Plot Twist!
    • #1
    • 6th Sep 17, 1:34 PM
    Dad wants to sell his shares.. Plot Twist! 6th Sep 17 at 1:34 PM
    First post... be gentle

    My elderly father would like to sell his paper shares - he has about £45K worth in one company.

    Naturally he would like to avoid CGT.

    He and I know next to nothing about shares or CGT but after a morning of reading would the following be sensible..?

    Transfer half the shares (£22.5K) to his wife. Neither of them have other sums liable to CGT.

    Each sell half now and the other half April 2018? This way there would be 4 transactions total, each producing a profit under the £11300 CGT allowance.

    Seems too easy...

    Any pointers greatfully appreciated. Especially who to approach to sell the things for him!

    Apologies if I've vastly over simplified things
    Last edited by Arpy; 07-09-2017 at 11:21 AM.
Page 1
    • jimjames
    • By jimjames 6th Sep 17, 1:46 PM
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    jimjames
    • #2
    • 6th Sep 17, 1:46 PM
    • #2
    • 6th Sep 17, 1:46 PM
    What was the purchase price/value? Your calculation appears to assume that the price paid was virtually 0? CGT is only paid on profit not on the sale price.

    But on that basis yes your plan will give zero CGT. Bear in mind the price may be different in 12 months
    Last edited by jimjames; 06-09-2017 at 1:49 PM.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • george4064
    • By george4064 6th Sep 17, 2:09 PM
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    george4064
    • #3
    • 6th Sep 17, 2:09 PM
    • #3
    • 6th Sep 17, 2:09 PM
    The other thing to point out is that he may wish to lodge his shares into an electronic account, this will make it easier to manage the shares if he continues to hold some but more importantly will significantly reduce any dealing commissions.

    Lots of investment brokers to choose from including Hargreaves Lansdown, x-o.co.uk etc..

    For example, if you were to sell £45k worth of certificate shares via HL it will cost him 1% (max £50). However if he were to transfer them to electronic format and sell online it will cost only £11.95
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

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    • Arpy
    • By Arpy 6th Sep 17, 2:34 PM
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    Arpy
    • #4
    • 6th Sep 17, 2:34 PM
    • #4
    • 6th Sep 17, 2:34 PM
    What was the purchase price/value? Your calculation appears to assume that the price paid was virtually 0? CGT is only paid on profit not on the sale price.

    But on that basis yes your plan will give zero CGT. Bear in mind the price may be different in 12 months
    Originally posted by jimjames
    He reckons he paid about £2.50 for them and they're worth about £45 now. So almost zero paid

    The other thing to point out is that he may wish to lodge his shares into an electronic account, this will make it easier to manage the shares if he continues to hold some but more importantly will significantly reduce any dealing commissions.

    Lots of investment brokers to choose from including Hargreaves Lansdown, x-o.co.uk etc..

    For example, if you were to sell £45k worth of certificate shares via HL it will cost him 1% (max £50). However if he were to transfer them to electronic format and sell online it will cost only £11.95
    Originally posted by george4064
    I've just been reading about that very thing with Sharedeal Active. Seems reasonably easy to transfer his paper shares into an online account. I assume I'd have to set up one for mum as well.. that leaves the question of how does he transfer half to her?

    Thanks both for the replies
    • Malthusian
    • By Malthusian 6th Sep 17, 2:39 PM
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    Malthusian
    • #5
    • 6th Sep 17, 2:39 PM
    • #5
    • 6th Sep 17, 2:39 PM
    that leaves the question of how does he transfer half to her?
    Originally posted by Arpy
    You will need to complete a form like this one and send it to the registrars.
    • MallyGirl
    • By MallyGirl 6th Sep 17, 2:46 PM
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    MallyGirl
    • #6
    • 6th Sep 17, 2:46 PM
    • #6
    • 6th Sep 17, 2:46 PM
    it is very easily done - I did similar when my sharesave at work matured and would have incurred CGT. I setup accounts for self and DH with x-o, transferred half the shares to DH, lodged them with x-o and then sold online and paid £5.95 per transaction to sell them.
    • george4064
    • By george4064 6th Sep 17, 2:54 PM
    • 820 Posts
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    george4064
    • #7
    • 6th Sep 17, 2:54 PM
    • #7
    • 6th Sep 17, 2:54 PM
    He reckons he paid about £2.50 for them and they're worth about £45 now. So almost zero paid



    I've just been reading about that very thing with Sharedeal Active. Seems reasonably easy to transfer his paper shares into an online account. I assume I'd have to set up one for mum as well.. that leaves the question of how does he transfer half to her?

    Thanks both for the replies
    Originally posted by Arpy
    Probably best to lodge them into a HL Fund & Share (F&S) account in his name, then transfer half of the shares from your Dad's HL F&S account to your Mum's HL F&S account.

    Please note it is free to lodge certificate shares into an electronic account, however there may be charges when transferring shares between electronic accounts (ie from your Dad to your Mum's account).

    Check before you do it.
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

    Save £12k in 2016 - #045 £10,358.81/£12,000 (86%)
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    • Arpy
    • By Arpy 6th Sep 17, 4:18 PM
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    Arpy
    • #8
    • 6th Sep 17, 4:18 PM
    • #8
    • 6th Sep 17, 4:18 PM
    Thank you all. Such a helpful bunch!

    I'm confused by one thing - should he transfer half to my mum first, via the registrar, and then set up both electronic accounts, paying their respective shares in to their own accounts before selling, or

    should we simply set up both accounts, pay all the shares into his and then transfer half to my mum's (is that way of transferring shares possible)?

    Thanks!
    • george4064
    • By george4064 6th Sep 17, 4:27 PM
    • 820 Posts
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    george4064
    • #9
    • 6th Sep 17, 4:27 PM
    • #9
    • 6th Sep 17, 4:27 PM
    Thank you all. Such a helpful bunch!

    I'm confused by one thing - should he transfer half to my mum first, via the registrar, and then set up both electronic accounts, paying their respective shares in to their own accounts before selling, or

    should we simply set up both accounts, pay all the shares into his and then transfer half to my mum's (is that way of transferring shares possible)?

    Thanks!
    Originally posted by Arpy
    Both are possible, so it just depends on cost and urgency really.

    I would imagine it would be easier and quicker to transfer the shares once they are in electronic format rather than via the registrar in certificated form.
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

    Save £12k in 2016 - #045 £10,358.81/£12,000 (86%)
    Save £12k in 2017 - #003 £9,136.98/£12,000 (76%)
    • MallyGirl
    • By MallyGirl 6th Sep 17, 4:31 PM
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    MallyGirl
    I can't comment on transferring in electronic format but it was pretty quick and easy to do the old fashioned way via the registrar (with no fees)
    • Ifts
    • By Ifts 6th Sep 17, 5:17 PM
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    Ifts
    I would open the 2 nominee accounts first and then once the shares are held in electronic form it should be easier for your dad to transfer half into your mums name.


    You could use someone like X-O.co.uk share dealing services (£5.95 per trade) for a cheap method of selling the shares.

    Open a Share Dealing account with X-O.co.uk - free to open and no annual account charges - then transfer your share certificate in to your account (to be safe send the shares in by registered post) and sell them for £5.95 per share holding.

    How do I transfer in stock that I hold in the form of certificates?

    http://www.x-o.co.uk/how_to_use.htm#5
    Never let the perfume of the premium overpower the odour of the risk
    • Arpy
    • By Arpy 7th Sep 17, 11:35 AM
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    Arpy
    So the plot thickens...

    I've passed back all the info you kind lot have provided to my dad. He agrees that he should give half his shares to mum and then both dispose of them in two goes, one now and one after Apr next year.

    So the twist is... they want to give the realised cash to me and my sibling... Once I'd got up off the floor (this is a lot of money to us) I thought maybe that's not so simple.

    If they cashed out they'd be giving us each about £22K, albeit in two tax-year amounts. I'm pretty sure there's a limit on how much cash a parent can gift a child?

    Would they be better to dispose in the timetable they propose but instead of cashing out just transfer the shares to me and my sibling in the amounts proposed?

    Could we then sell (if we wanted to) 'our' shares in the same time table, and thus avoid paying CGT ourselves?

    Hope that makes sense...

    Thanks so much again.
    • LHW99
    • By LHW99 7th Sep 17, 11:43 AM
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    LHW99
    I'm not sure about CGT although I think it would be triggered for them if they passed the shares on as a gift, as a notional gain.

    But provided they survive seven years after the gift it would drop out of inheritance tax, and for less time than that there would be a sliding scale (I think!)
    • atush
    • By atush 7th Sep 17, 11:48 AM
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    atush
    There is an annual gilft allowance, but youc an give more- it is a taxation issue. In that a gift of 11K PA would then need your parents to survive for 7 years for the sum to fall out of IHT.

    Another thing to think about is their other wealth and their health. Giving away large amounts of money when you are infirm and likely to need care could fall foul of deprivation of assets rules
    • kidmugsy
    • By kidmugsy 7th Sep 17, 12:00 PM
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    kidmugsy
    So the plot thickens...I'm pretty sure there's a limit on how much cash a parent can gift a child?
    Originally posted by Arpy
    There's no limit on the gift. There is however a limit on the amount that is automatically exempt from IHT. (If your parents survive for seven years it's all exempt of course.) Whether IHT matters depends on how rich your parents are. If they own their own house and leave it directly to direct descendants (including adopted children, step children and foster children or previously fostered children) then IHT for a married couple sets in currently at £850k, to be £1M in a few years time. People with anywhere near that much money should, of course, have seen a competent lawyer to ensure that their wills are designed to take advantage of these amounts (and to cope with complications e.g. a re-married widow).

    Now then, how much is automatically exempt? £3k p.a. but with the proviso that if the previous year's £3k wasn't used then it can be carried forward. So (correct me if I'm assuming too much) each can gift £6k this tax year and £3k next tax year with no danger of IHT. Gifts in excess of this might be liable to IHT depending on dates of death; so the sooner gifts are made the better. There's also a tiny wrinkle: one can make IHT-exempt gifts of £250 per tax year to anyone who hasn't received part of the £3k. So: suppose that in this tax year Mum gifts £6k to child A and £250 to child B. Dad does the opposite. Next year they repeat the trick. Bingo: total IHT-exempt gifts = £(2 x 6k + 2 x £250 + 2 x 3k + 2 x £250) = £19k.
    Last edited by kidmugsy; 07-09-2017 at 12:02 PM.
    • xylophone
    • By xylophone 7th Sep 17, 12:29 PM
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    xylophone
    I wonder would it work if Dad now transfers all the shares into a joint nominee account with Mum.

    The spouse receiving the shares is treated as if he / she had acquired
    these shares at the price paid / value received, by the spouse giving the
    shares.

    https://www.gov.uk/capital-gains-tax/gifts

    Mum and Dad now own the shares.

    https://www.gov.uk/tax-sell-shares/work-out-your-gain

    The shares are sold, realising say £22,500 and the cash goes into their joint account.

    https://www.gov.uk/inheritance-tax/gifts


    Mum gives you £11,250 and Dad gives your sister the same.

    If they didn't use their gifting allowance last tax year then £6000 of each gift would not count for IHT - the balance would be a PET.

    Next tax year they sell the remainder of the shares - Dad gives you his half of the proceeds and Mum gives your sister the same.

    £3000 of each doesn't count for IHT, the balance is a PET.
    • Jeems
    • By Jeems 7th Sep 17, 12:42 PM
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    Jeems
    They can also carry over a maximum of one years gift allowance from the previous year (assuming they didnt gift you anything last year) So if your parents split the shares, and cash out, they could give you and your sibling 6k each this before this tax year ends and another 3k each in the new one. That's 18k in cash gifted to you and your sibling which will not be liable for IHT at all. https://www.gov.uk/inheritance-tax/gifts

    So that leaves 4.5k. Depending how ethical you are, your parents could then withdraw the rest in cash (either in installments or lump sum) and give it to you. No official transaction trail.

    Hope that helps
    • Malthusian
    • By Malthusian 7th Sep 17, 2:45 PM
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    Malthusian
    But provided they survive seven years after the gift it would drop out of inheritance tax, and for less time than that there would be a sliding scale (I think!)
    Originally posted by LHW99
    If I had a pound for every time someone got taper relief (that sliding scale) wrong I could give it all to someone and be one of the few people actually affected by taper relief.

    Taper relief only applies if you give away more than your nil rate band, i.e. £325,000, and then only to the balance above £325,000. (If your parents leave everything to each other, read £650,000.) Otherwise, the gift uses up their nil rate band before the estate does. No tax on the gift, so no taper relief.

    The fact that the gift might push (say) £16,000 of the estate above the nil rate band on which Inheritance Tax does apply is just too bad.

    It is worth emphasising that no, there is no limit whatsoever on how much cash a parent can gift a child. There are rules on when the gift might be subject to Inheritance Tax which is a very different thing.

    And those rules are probably academic for the OP, because if his parents simply hung onto the shares for their lifetimes, they would end up paying Inheritance Tax anyway - assuming their estates are big enough to worry about that.

    As you said, giving the shares to someone other than your spouse is a disposal for CGT purposes, so it makes no difference in that regard whether he gives the OP the shares or sells them and gives the cash.
    • AnotherJoe
    • By AnotherJoe 7th Sep 17, 3:49 PM
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    AnotherJoe
    So the plot thickens...

    I've passed back all the info you kind lot have provided to my dad. He agrees that he should give half his shares to mum and then both dispose of them in two goes, one now and one after Apr next year.

    So the twist is... they want to give the realised cash to me and my sibling... Once I'd got up off the floor (this is a lot of money to us) I thought maybe that's not so simple.

    If they cashed out they'd be giving us each about £22K, albeit in two tax-year amounts. I'm pretty sure there's a limit on how much cash a parent can gift a child?

    Would they be better to dispose in the timetable they propose but instead of cashing out just transfer the shares to me and my sibling in the amounts proposed?

    Could we then sell (if we wanted to) 'our' shares in the same time table, and thus avoid paying CGT ourselves?

    Hope that makes sense...

    Thanks so much again.
    Originally posted by Arpy

    There isnt. So the rest of your post is moot.
    • Arpy
    • By Arpy 7th Sep 17, 5:48 PM
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    Arpy
    Wow. All those answers are so helpful - thank you.

    As for IHT, I don't think their estate would top £600k so probably not an issue. Of course one can't predict the future but I don't imagine it will be relevant.

    Dad likes the suggestion of them opening a joint nominee account with mum and then them each giving me and sis £11250 each this year and the same again (say) in Apr 18, as above.

    I appreciate this a nice problem to have and we are so grateful for all your help.
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