Capital Gains Tax - gift

OldBeanz

Hi there,


My mother has just died and my father who is the beneficiary of the majority of her estate wishes to gift her shares worth circa £120k directly to my brother and myself.
As the executor I was going to transfer the shares into my father's name then with his authority gift half the shares from him to me and sell the other half as my brother does not want to hold shares.
How do I value the shares for CGT?

CLAPTON

there is no cgt on death only IHT if applicable

but you value them on the day of death - price in the newspaper will do.

dzug1

It's Inheritance Tax you need to value them for. Advice on how to do that here:

http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/shares.htm#1

Why not sell/transfer the shares from the estate rather than transferring them to your father first? That seems to be simpler and a legitimate thing for an executor to do.

Look into a Deed of Variation to reduce future IHT problems

CLAPTON

dzug1 wrote: »

It's Inheritance Tax you need to value them for. Advice on how to do that here:

http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/shares.htm#1

Why not sell/transfer the shares from the estate rather than transferring them to your father first? That seems to be simpler and a legitimate thing for an executor to do.

Look into a Deed of Variation to reduce future IHT problems

with the ability to transfer the un-used portion of the husbands IHT allowance, a deed of variation may be a disadvantge in the longer terms

holly_hobby

The husband is still alive, its wife who has died.

Yes, if husband inherits wife's shares and indeed her entire estate, and IF there were no non-exempt gifts os at the time of her passing, this would leave her full nil rate IHT exemption of 325k in tact for future tsf (by application to HMRC by his executors) to his estate on death - giving a total future potential 650k IHT exemption (at current nil rate IHT band figs), for use by his executors in administering his estate.

Hubby gifting the wife's inherited shares to children would be a chargeable event for CGT (dont expect liability all things being equal and if a short duration between exercises), and also a PET under IHT, so as long as he survivies 7 yrs from tsf, or his net estate (inc non exempt gifts) falls below 650k if he passes within this time - alls well IHT wise.

If there is possible IHT expsoure during the PET period, a term assurance or gift inter vivos policy can be used to address any IHT liability.

Value of shares for your later CGT computation, will be that on the date of Dads transfer to you OR mums death (if you do bypass Dad, and tsf ownership direct from mums estate) - as noted a DOV could be played.

If you do tsf shares direct from Mums estate - there may be IHT issues (as its only tsfs between spouses that are IHT exempt) this will hinge on the value of her net estate on death.

Hope this helps

Holly x

OldBeanz

Mother's total estate was circa £250k including £120k she gave my tbro and myself last year. Father has 15k shares and £90k cash plus the £120k shares from my mother. Hopefully we can transfer without involving paying any extra inheritance tax.

holly_hobby

There is no IHT if her NET estate is under 325k (which appears to be the case inc the non-exempt gifts already made) - so you can do it either way, either via a Deed of Variation (DOV) (within 2 yrs of death) or Dad assuming ownership and then transferring to you. That way would also be a chargeable event for Dad under CGT at point of tsf - but given it will be farily simultaneous there shouldnt be any CGT liaiblity, given his net annual exemption covers a gain of upto £10,900 (2013/14 rates, and unless the value of the shares between his point of inheritance to tsf to you/bro, rocket in value.

I've already discussed CGT for yourself - the only thing to be aware of under a DOV, is that the value of the shares (for CGT) will be at the date of Mums death NOT when you actually take ownership following discharge of the DOV itself.

As Mums net estate doesn't appear to have any IHT liability (being under 325k nil rate exemption), a DOV may be the less convoluted route for all to puruse (not withstanding the noted consideration with regards the resulting deemed date of acquisition and value under a DOV and how this will influence any later exposure).

Can I also extend my sympathies to you and family on the loss of Mum .... things will be difficult for you now, but time helps and you've support here if you need it.

For guidance, I've added a link to an HMRC guide re DOVs - http://www.hmrc.gov.uk/cto/customerguide/page21.htm

Hope this helps

Holly xx

OldBeanz

Thanks for the help and kind words Holly.

CLAPTON

how much is your father's estate worth approximately?

holly_hobby

OldBeanz wrote: »

Father has 15k shares and £90k cash plus the £120k shares from my mother.

Which currently tots upto 225k by my reckoning (or less, if any of the 120k shares from Mother, are to be administered under a DOV).

Hope this helps

Holly

CLAPTON

holly_hobby wrote: »

Which currently tots upto 225k by my reckoning (or less, if any of the 120k shares from Mother, are to be administered under a DOV).

Hope this helps

Holly

If you are answering my question about the size of the remaining estate, it seemed strange that there is no house, so just asking for clarity about the size of the remaining estate.

I see no benefit in a DOV as transferring shares ownership has to be done anyway and there are in general no IHT benefits: depending upon the future may have negative financial impact