Joint Capital Gains Tax allowance - CFD brokerage account (investing)

capitalgainsnewbie

Hello all,

My first post on MSE.com although I have long been aware of it as a 'lurker' and know that there are some incredibly knowledgeable members on here - my name is James :beer:

My question is regarding Capital Gains Tax allowance on a jointly owned brokerage account. I have already trawled HMRC's website and made a call to them to have a curt conversation with one of their technicians regarding this (who was in fact less helpful than their website!).

Here is the situation:

I have financial services experience and a track record of investing personally, despite my relatively 'tender age' (24), which has meant that I havent completed many tax returns in my time since graduating from University a couple of years ago. (All investments to date have been utilising spread betting products which as you know, are currently CGT/stamp duty exempt).

One of my close friends has asked whether we could invest together as a 'hobby', where we would put an equal amount of savings into a joint brokerage account, with Saxo Capital Markets (as it happens).

Rather than holding the account in my sole name, where I would be solely accountable for the total CGT liability (on what is only half of my savings, and half of my friend's - confirmed by HMRC), we have discovered that we can register the brokerage account jointly with each of our names on the new account form.

From what I have read from one or two sources online (less reputable that MSE.com) this would entitle us to a combined CGT allowance (10,600 each, 21,200 total), and thus reduce the sole burden that would otherwise be with me if registered only in my name.

I have read in many places that this often refers to married couples/civil partners (of which my friend and I are neither!), but I did also find this which suggests it can be with anyone:

"Everyone has an annual CGT exemption. If, therefore, you are investing enough to be likely to produce this sort of gain, it makes sense, purely from a tax point of view, to share ownership with another by holding jointly. This is most commonly with a spouse or partner, but it doesn't have to be. It could be anyone. In this way all gains and losses are automatically assumed to be due 50% to each of the joint holders.

Thus solely-owned shares showing taxable gains that you wish to sell can first be put into joint names with your husband or wife, thereby effectively gifting half to that spouse at cost. Upon selling the now jointly-owned holding two benefits accrue. Firstly the gain is split into two, and secondly two exemptions are available, each against half the gain."


For reference, we will be investing using CFD products rather than physical stocks ('cash equities'), where CGT is the only tax payable.

Can any of you incredibly well-informed members please confirm this for me?


Thank you all very much, in advance of your much appreciated help :A

James

grey_gym_sock

capitalgainsnewbie wrote: »

Thus solely-owned shares showing taxable gains that you wish to sell can first be put into joint names with your husband or wife, thereby effectively gifting half to that spouse at cost. Upon selling the now jointly-owned holding two benefits accrue. Firstly the gain is split into two, and secondly two exemptions are available, each against half the gain."

this move - starting with solely-owned shares, and switching them to joint names - will only work for a married couple. because, unless the 2 parties are married, the change of ownership is a disposal for CGT purposes.

if you start out with jointly-owned shares, then - assuming you each have a 50% share (which doesn't have to be the case, but is a kind of default position) - you'll each have 50% of any capital gains.

capitalgainsnewbie

grey_gym_sock wrote: »

this move - starting with solely-owned shares, and switching them to joint names - will only work for a married couple. because, unless the 2 parties are married, the change of ownership is a disposal for CGT purposes.

if you start out with jointly-owned shares, then - assuming you each have a 50% share (which doesn't have to be the case, but is a kind of default position) - you'll each have 50% of any capital gains.

Thanks for your response, thats helpful.

Presumably in my case, where I would be opening a jointly registered account with no pre-existing investments (CFD in this case rather than shares) all subsequent investments opened and managed through this account would allow us to share the CGT liability (50:50)?

Lastly, any idea whether you can have more than 2 parties involved in a 'joint account' relationship? For example, Saxo (the broker who I shall be using) allows up to 3 names on their joint account opening form..

Presumably if 3 individuals are on the form, who have each deposited money into their joint brokerage account, they could each report their share of the CGT liability individually? (i.e. there would be a 1/3 CGT liability per person in a 3 person joint account)?

If the latter is correct, then it may be worth exploring, especially as I have another friend considering joining us.

Alternatively I'll open an account on behalf of myself and 2 family members (we all live at the same address) - think this can be done?

grey_gym_sock

yeah, start out with a new account, and put equal amounts of cash in, and you can divide capital gains equally among you. if your broker is happy with 3 names, that's fine.

capitalgainsnewbie

grey_gym_sock wrote: »

yeah, start out with a new account, and put equal amounts of cash in, and you can divide capital gains equally among you. if your broker is happy with 3 names, that's fine.

Wow, thank goodness for the resources of the web. HMRC told me to "go to an IFA" and that the liability is in the sole name of the person transacting the investments on the account.

Because of this, instead of getting frankly screwed over with only a £10,600 CGT allowance on two/three people's money (who wouldnt be paying anything, talk about double standards on avoidance!) I could have up to a combined £31,800 combined CGT allowance 3 ways.

Thank you very much and to everyone else on the web in my situation - i hope you too can benefit from this thread.

John_Pierpoint

capitalgainsnewbie wrote: »

Because of this, instead of getting frankly screwed over with only a £10,600 CGT allowance on two/three people's money (who wouldnt be paying anything, talk about double standards on avoidance!) I could have up to a combined £31,800 combined CGT allowance 3 ways.

I think you meant [STRIKE]I[/STRIKE] We could have up to a combined £31,800 combined CGT allowance 3 ways.

Have you agreed what to do if one member of the club uses up their allowance on something else - say a forced take-over of some shares they own?
They might be sleeping partners in reality but in theory you will all have some input.

capitalgainsnewbie

John_Pierpoint wrote: »

I think you meant [STRIKE]I[/STRIKE] We could have up to a combined £31,800 combined CGT allowance 3 ways.

Have you agreed what to do if one member of the club uses up their allowance on something else - say a forced take-over of some shares they own?
They might be sleeping partners in reality but in theory you will all have some input.

Indeed, I meant we - if we breach our combined CGT threshold then we would have produced a 100% return, which I think is unlikely even with the greatest faith in our investing capabilities.

Indeed everyone will play an active part in the investment process and we shall each be conducting financial transactions in buying/selling CFD investment products (otherwise CGT liability is with the individual conducting all of the transactions I believe, even if there are named partners on the account who are dormant).

You raise a good point however