Capital gains on share sales

Terry_Towelling

My better half inherited a load of shares with loads of different companies many many years ago. Some of these have been bought out (ICI for example), some she got out of when they were taken over by overseas companies, but many she retained and many of these have gone through mergers and identity changes over the intervening years (decades).

I am now her Attorney and, on the horizon, is the prospect of full-time residential care for her (over my dead body, if I can help it). I may need to sell her holdings to pay for her care but how will HMRC view the gains made through these sales?

I have no idea what they were worth when she inherited them (many back in the 1970s before I even knew her) so how do I work out how much she will have to pay in Capital Gains Tax?

I'm sure there is something on HMRC's website that will tell me but if someone here can give me some insight - and in plain English rather than HMRC-English that would be much appreciated.

masonic

How quickly would they need to be sold? Could you get away with selling £11.7k or less per tax year? That would avoid any possibility of there being a taxable gain.

jennyjj

masonic wrote: »

How quickly would they need to be sold? Could you get away with selling £11.7k or less per tax year? That would avoid any possibility of there being a taxable gain.

I may be mistaken, so check this, but if she sells less than twice that annual allowance per tax year, and she.s confident that she does not make taxable profit above the threshold, then she doesn't need to 'do the calculations' or report the sales.
Pretty sure that if she sells less than the allowance, she need not report at all.

Other than that, it's a right pain in the 4r53

jennyjj

Terry_Towelling wrote: »

My better half inherited a load of shares . ...

I am now her Attorney

If she still has her mental faculties AND she trusts you, then there may be significant advantage in gifting some of those shares to you. Then the tax liabilities pass to you as though you had acquired them in the same way at the same unknown values. But it sounds like you might have more time over which to divest them.
I strongly advise you get legal advice though.

IANAL. DYOR

jamesd

Terry_Towelling wrote: »

I may need to sell her holdings to pay for her care but how will HMRC view the gains made through these sales?

I have no idea what they were worth when she inherited them (many back in the 1970s before I even knew her) so how do I work out how much she will have to pay in Capital Gains Tax?

I suggest that you cheat a bit to simplify things. CGT reporting is needed when either:

1. the capital gain is greater than the annual allowance, £11,700
2. the total value of the disposals is more than four times the annual CGT allowance

Also:

3. no CGT is due at the time an asset is transferred between spouses, including if payment is made

You can cheat to simplify your problem by selling £11,700 worth a year for her [STRIKE]and by transferring another £11,700 to you and selling them to use your own CGT allowance[/STRIKE]. This way you know that even if the acquisition price was nil there's no gain to report.

If desired the shares can be repurchased again, bed and breakfasting. You have to leave a 30 day gap between sale and purchase but none is required if the purchase is within an ISA and the sale was outside or vice versa. After the repurchase the purchase price will be the new one and you will know it.

If you start this with the toughest ones to value you can greatly simplify things.

The investor relations departments of companies can be helpful in working out prices after the effects of company ownership changes and share splits and merges.

Keep_pedalling

If your better half no longer has the mental capacity to make decisions about gifting shares, then you should not attempt this yourself as it is beyond your authority to do so. If she still has this capacity then gifting any of her assets could be seen as deliberate deprivation of assets.

If all these shares were obtained pre 31st March 1982, then things a simplified a little as that is the date that is used for the acquisition price.

masonic

IanManc wrote: »

I agree with all of the above except the use of the word "cheat".

Arranging your affairs in order to make use of tax allowances is lawful. Cheating is dishonest, and this isn't dishonest.

cheat verb
1. act dishonestly or unfairly in order to gain an advantage.
"she always cheats at cards"
2. avoid (something undesirable) by luck or skill.

It's great that words can be used to denote different things. I'd hate it if it were dishonest to have a life-threatening illness and cheat death.

jamesd

Keep_pedalling wrote: »

If your better half no longer has the mental capacity to make decisions about gifting shares, then you should not attempt this yourself as it is beyond your authority to do so. If she still has this capacity then gifting any of her assets could be seen as deliberate deprivation of assets.

Gifting isn't needed because one of these approaches can be used:

1. paying the current value at the time of the transfer
2. after sale and repurchase, transferring the same number of shares back

Either approach avoids any net transfer of value between them, which is what I intended.

Terry_Towelling

Thanks for all the advice, folks.

To clear a few points, she has dementia and has lost capacity so gifting is out. As far as trust is concerned, she has no concept of what that might be but I will do nothing to 'harm' her in any way - physically, mentally, financially etc. I will also bear in mind the resource available through Investor Relations depts. and Share Registrars and I can see that legal advice is going to be needed.

As for selling things over time, I don't think that would work except at the end of the financial year. Care home fees range between £750 and £1500+ per week (yes, per week, not month). If we had to pay for care we'd be down to the state-funding limit of £23.5K within a year and a half - less if CGT has to be paid.

So, if I understand correctly, the suggestion is that I transfer holdings to my name and pay her the current value. I sell the holdings, buy back and transfer back to her in return for the original payment. We thereby have a new start point for gains and there is little prospect of incurring any CGT liability in the short to medium term. I lose a bit in trading fees (and movements in share price will have an effect that can't be predicted). Presumably, I could short-cut the process by buying them back for her directly as her Attorney. I'd probably have to make good on any shortfalls (if there were any) but so be it. As long as I don't profit and she doesn't lose all should be well.

Of course, I'm really hoping she will not need residential care - I want her to pass peacefully here at home with me (head in the sand? Maybe). What a thing to be hoping for and what a thing to have as the light at the end of your tunnel.

Please put me right if I have misinterpreted anything. Thanks again.

dmelife

You can!!!8217;t buy the shares for less than market value without the difference being treated as a gift.

Stop trying to avoid paying a small amount of tax. If the investments had been managed correctly this wouldn!!!8217;t be an issue.

If you can!!!8217;t get the correct cost price then treat it all as gains. Or, do your best guess of the cost price and submit the calculation and be prepared for HMRC to query it. Although most likely they won!!!8217;t.

masonic

dmelife wrote: »

You can!!!8217;t buy the shares for less than market value without the difference being treated as a gift.

Stop trying to avoid paying a small amount of tax. If the investments had been managed correctly this wouldn!!!8217;t be an issue.

If you can!!!8217;t get the correct cost price then treat it all as gains. Or, do your best guess of the cost price and submit the calculation and be prepared for HMRC to query it. Although most likely they won!!!8217;t.

This thread is about managing the investments correctly going forward in order for this not to be an issue.

Managing the investments correctly includes ensuring that available CGT allowances are fully utilised, which is what is being discussed. The aim is not to "avoid paying a small amount of tax" but to avoid doing a huge amount of work calculating what the tax position actually is.

Estimated figures can be submitted on a tax return, but it is necessary to make a declaration to that effect and you would need to provide accurate figures by the usual submission deadline. IMHO, to make a dishonest statement that your return does not contain estimated figures would be worse than managing the situation as described in earlier posts.