Help working out GCT on share sale and spouse

davenewbie

Hi,

Found this forum by searching on google, what have I been missing !

I'm after some help, I hope you can give me some pointers.

A few years back I bought some shares in the company I work for @ £100 per share. We've been asked to sell these shares now @ around £400 ( beers all round).

However, they've asked me if I want to transfer any shares to my wife before sale which looks like a good idea. I'm after some advice to see if someone can help me work out how to maximize my profit.

Some background information:

I currently own 210 shares.
Purchase price was 100 sale price expected to be around 400 (rumours of 700 have been bounding around but I can't see that)
Company was a Close Company when I purchased shares
I currently enjoy tax relief on a loan taken to buy the shares, due to the close company status
Loan is currently at about 18k outstanding
I'm taxed at 40%
My wife is self employed (makes wedding cakes) earning around 3k as year. So I assume low tax bracket.

I know about the £10,100 free amount (not sure if its changed this year).

So assuming profit is (£300 x 210) £63k

I've read that if I transfer some shares to my wife then the ones she gets will be taxed at her tax bracket when we sell. However is this affected by profit of the transfer? So if I keep 10k worth to maximize my free amount and she has the rest (£53k less her 10k) will that then push her into the 40% bracket thus destroying the benefit ?

Or do I keep her estimated amount below £37 to ensure she doesn't hit the 40%.

I appreciate that these taxes are probably totally unrelated but I need to be certain before transferring over.

This is all dependant I know on the £400 per share.

My company has said they can't advise but generally state a 50/50 split but I wonder if a 70/30 might be better. Although, this takes her close to the £37k income tax limit if these are related.

Also, I'm not sure if the Close company feature comes into it at all. I certainly gain from this with the loan. The company is no longer a close company.

Its all very confusing, I know I'm very lucky to have this opportunity but I really want to make the most I can from it.

Any advise is greatly appreciated. I've searched this forum but not really seen a situation that is like mine.

All the best and thanks

Dave

ceeforcat

Yes jimmo – but it happened to me more than once. The client owned a business property and, in the days of retirement relief, decided to forego this and rent out the property. (I believe that the tenant was a young person whom they had helped out for many years). However the new business did not succeed and the client decided to sell. Obviously he enquired as to the merits of transferring the property into joint names. I advised him to obtain a formal valuation, transfer the property into joint names and wait a year. He agreed with my advice although was not over the moon with the costs of the exercise. The property was duly sold and the CGT was negligible.

Unfortunately his wife passed away but this did not prevent HMRC from challenging the transfer. Thankfully, the legal documentation and valuations were present and, after a further year, the case was closed down without adjustment.

This is one of at least three instances in my own experience. From memory, the cases of Fulford v Dobson and/or Furniss v Dawson spring to mind.

Now, the good news! I honestly do not think that this applies to shareholdings but I could be way off the mark. Will do some research and come back if I find out anything constructive.

davenewbie

Hi, thanks for the replies and all the very good information/links. I think I must have been reading some very old information when it talks about income tax relationships. I'll have a read up on the transfer in respect of shares but the sale isn't 100% yet and could be some time off so we've been told we should be fine dong the transfer as long as we do it asap.

The whole 18% amount makes the descision easier, if thats the case then the whole 70/30 part is not relavent. So I think I'm going to request half goes to my wife and then if its not challenged great if it is then it was worth a go.

Thanks again for your input, you've made it much clearer for me.

Kind Regards

Dave

ceeforcat

Hi jimmo - all of the cases were in Northern Ireland and with different inspectors. In the first case, you could say I lost - the revenue 'challenged the effectiveness' of the transaction. Believe it or not, there was no adjustment to the CGT as there was no liability - waste of time and effort for everyone but there was no arguing with this particular inspector. In the second instance - large holiday home in Bangor, I was well prepared and had similar 'evidence' in place. There was a small adjustment in the third case as previously mentioned and that was down to decimal place percentages!

I know you are a bit perplexed about this jimmo but have a read of this article:

http://www.taxexpert.co.uk/property_tax/cgt_property.php

P.S. - if you could find something equally definitive to counter my experiences, I would be only too happy to agree.

I should also say that I would be interested in your opinion on this (I have already indicated some time ago that we may have been in HMRC at the same time but fully respect your wish to divulge nothing in this regard). I do follow your postings on here and am not too proud to admit that I am certainly more likely to learn considerably more from them than you are from mine.

Good Luck!