Transferring OEIC between spouses

aroominyork

OH and I hold the same equity index fund, unwrapped, on Interactive Investor. With the ever reducing CGT allowance (and markets continuing to rise) it will take longer for her to sell her holding than it will take me, without incurring a CGT bill. Transferring some of her holding to me looks useful, once I have spare CGT allowance. My question is whether this is as simple as it looks on paper and whether it take effect immediately, eg if the transfer it made on 4 April can I sell on 5 April (calculating the gain based on her purchase price)?

vacheron

I use II now, but I moved some of my HSBC Global Strategy OEIC to my wife and I about 2 years ago while I we were both with Hargreaves Lansdown.

When I e-mailed to ask if it was possible, they explained that all I had to do was send them an e-mail with a covering note explaining what I wanted to do, her account number, the amount to be transferred, and a statement that I understood that this would become her property on transfer.

They sorted it in about 2 days, and yes, you can sell as soon as the funds arrive (as you noted, using her original purchase price for the CGT calculation). 

aroominyork

Am I right in thinking that if one spouse is a basic rate taxpayer and holds assets generating £5000 dividends, then no dividend tax would be payable if the assets were transferred to the other spouse who earned no more than £8070 (ie making use of £4500 unused personal allowance + £500 untaxed dividends)?

aroominyork

I’ll re-phrase the question in case it wasn’t clear. Spouse 1 is a basic rate taxpayer, say £20k income, and holds an unwrapped equity fund generating £5k annual dividends. Would it reduce dividend tax to zero if the equity fund was transferred to Spouse 2, so long as Spouse 2 had no more than £8070 taxable income? The reasoning is that Spouse 2 has £4500 of unused personal income and the first £500 of dividends are untaxed. (Spouse 1 could of course retain enough of the equity fund to use their £500 dividend allowance.)

poseidon1

aroominyork said:

I’ll re-phrase the question in case it wasn’t clear. Spouse 1 is a basic rate taxpayer, say £20k income, and holds an unwrapped equity fund generating £5k annual dividends. Would it reduce dividend tax to zero if the equity fund was transferred to Spouse 2, so long as Spouse 2 had no more than £8070 taxable income? The reasoning is that Spouse 2 has £4500 of unused personal income and the first £500 of dividends are untaxed. (Spouse 1 could of course retain enough of the equity fund to use their £500 dividend allowance.)

Hmrc have a handy tool where you can calculate these ' what if' scenarios for yourself - see link below

https://www.tax.service.gov.uk/guidance/work-out-tax-on-your-savings-or-dividend-income/start/tax-year?c=1

aroominyork

So to recap, OH and I both own unwrapped HSBC FTSE All World Index. A couple of months ago OH transferred some of her units to me. I changed the unit price in my s.104 calculations by taking the weighted average of the units I already held and the s.104 value of the number of units she transferred to me.

I think we miscalculated the number she should transfer to me and I may transfer some back to her. How should I do the next s.104 adjustment? Do I carry out the same ‘weighted’ type of calculation, as if I had always owned the units I am passing back to her?; or should I retrospectively reduce the number of units she transferred to me and adjust the original calculation; or something else?

Notepad_Phil

aroominyork said:

... I think we miscalculated the number she should transfer to me and I may transfer some back to her. How should I do the next s.104 adjustment? Do I carry out the same ‘weighted’ type of calculation, as if I had always owned the units I am passing back to her?; or should I retrospectively reduce the number of units she transferred to me and adjust the original calculation; or something else?

I'm not a tax lawyer, but surely they became yours as soon as she gifted them across, so you would use the 'weighted' calculation of the unit price of your entirety of units i.e. including the gifted ones. I could see that there might be some weird quirky behaviour if you gifted them back within 30 days, but not after several months.

aroominyork

Notepad_Phil said:

aroominyork said:

... I think we miscalculated the number she should transfer to me and I may transfer some back to her. How should I do the next s.104 adjustment? Do I carry out the same ‘weighted’ type of calculation, as if I had always owned the units I am passing back to her?; or should I retrospectively reduce the number of units she transferred to me and adjust the original calculation; or something else?

I'm not a tax lawyer, but surely they became yours as soon as she gifted them across, so you would use the 'weighted' calculation of the unit price of your entirety of units i.e. including the gifted ones. I could see that there might be some weird quirky behaviour if you gifted them back within 30 days, but not after several months.

Thanks, Phil. Can anyone confirm this, and also pick up on the 30 day situation (not relevant here but definitely interesting)?