CGT on a bare trust

jennifernil

We set up bare trusts for our grandchildren back in 2013 and now wish to sell the shares in the one for our oldest grandson, he is 19, so that he receives the proceeds.  The shares are all in a single children’s investment plan and bought over several years, how do we, or he, calculate and deal with any CGT due?

poseidon1

Confusingly you say bare trusts ( in the plural) for grandchildren, but then go on to suggest all the share  investments were held in an undivided single investment account.

 If that is the case how on earth have you gone about identifying which shares belong to which child? If dividends were received since 2013, how were they allocated, and if necessary taxed? Were dividends ( if received) ever reinvested?

Were individual bare trust documents set up that identify the capital funds going into each trust, and was new capital added to each trust after 2013?

Has there been any attempt to produce formal accounts for these trusts?

Have the bare trusts been registered with HMRC at any point?.

As you can see the paucity of the information you have given, raises  a host of questions rather than answers.

jennifernil

Yes, one for each of 3 grandchildren.

Funds were added monthly for the 2 older children, from 2013, then contributions stopped a few years back.

Dividends automatically reinvested.

3rd grandchild bare trust was set up in 2018 and contributions still ongoing.

All 3 have been registered with HMRC.

All info on inward payments and shares purchased are available on line, or on paper for earlier purchases.

The scheme was originally with Bailey Gifford, but in 2018 was taken over by Hargreaves  Lansdowne.

No accounts prepared.

Jeremy535897

The gains are assessed on the grandchild, along with any personal gains he may have. If the annual exemption of £3,000 is exceeded, and he has no losses, there will be tax to pay.
https://www.gov.uk/government/publications/shares-and-capital-gains-tax-hs284-self-assessment-helpsheet/hs284-shares-and-capital-gains-tax-2024

poseidon1

In theory, you should be able to readily  reconstruct the total base cost of each investment holding inclusive of dividend reinvestment from the old Baiilie Gifford records prior to the handover to HL.

However I am familiar with what happened with this BG to HL handover ( I had a regular monthly BG investment saving plan over a similar period). From my recollection, when HL received the BG shares (in my case SMT), they entered HL's cost records at market value and it was necessary for me to manually alter the cost in the HL  GIA account back to the actual cumulative total cost.

 If you did the same thing, you should be able to rely on HL's record of the cumulative investment  cost. If you did not, suggest as part of your cost reconstruction you then amend HL's records for each child to make future disposals for the other 2 easier to ascertain.

Just a thought, if the current gains for the younger children already exceed £3,000 each you might want to consider partial disposals  ( within their exemptions) to  bed & JISA shareholdings this year and in years to come, assuming their annual JISA allowances are not being utilised.

Naturally partial disposals within his £3,000  exemption also open to the 19 year old if he is not intent on selling all his shares in one hit. A useful investment education opportunity in his case.

jennifernil

Thank you, that is very helpful.

We also transferred the whole thing  for all 3 children over from BG to HL , so does that mean we need to check the acquisition costs ourselves in case they may have been less than stated when we look online now at HL?  Like you , the  shares were and still are, in SMT.

Looking at the cost as shown by HL, the 2 oldest children both have a current gain of around £7k, so selling some this tax year to use the current £3k exemption is the way to go.  We will first discuss with his dad where the money is to go, a fixed rate interest ISA deposit  maybe,  it is intended as a deposit on a house eventually, or possibly a S&S ISA as I doubt he will be buying a house anytime soon.     Should also  look at doing the same with his sister’s fund, she is 15 so could have a JISA.

  The 19 year old is a student at present so has no income at the moment other than what he gets from any other savings he may have.

Youngest child is only 7, his gain is around £4k so far.  We have persuaded his Mum to open a S&S JISA so we are now moving some of his cash savings gradually into that.  We will see how that performs before deciding what to do with his HL fund.

I saw it said somewhere that any acquisition and selling costs can be deducted for CGT purposes, does that mean things like dealing fees?    As you will have gathered, I do not have much knowledge about this sort of thing, so your advice is much appreciated.

poseidon1

The problem with HL's 'cost' figures is they are almost certainly overstated by them entering the shares in their records at the market value on the day they received the transfers from BG. This means the gains you ascertained  from their records are similarly understated.

You will need to do a bit of spreadsheet work using BG's  acquistion records to correct for the true (lower) cost of the shares that entered HL's system. Any new shareholdings purchased via HL subsequently, then enhances the BG figures .

When you do come to sell all dealing fees pertaining to the sale will be clear on the contract note. The sale proceeds will be net of all attributable sale costs, so nothing for you to calculate in that regard.

wmb194

jennifernil said:

Thank you, that is very helpful.

We also transferred the whole thing  for all 3 children over from BG to HL , so does that mean we need to check the acquisition costs ourselves in case they may have been less than stated when we look online now at HL?  Like you , the  shares were and still are, in SMT.

Looking at the cost as shown by HL, the 2 oldest children both have a current gain of around £7k, so selling some this tax year to use the current £3k exemption is the way to go.  We will first discuss with his dad where the money is to go, a fixed rate interest ISA deposit  maybe,  it is intended as a deposit on a house eventually, or possibly a S&S ISA as I doubt he will be buying a house anytime soon.     Should also  look at doing the same with his sister’s fund, she is 15 so could have a JISA.

  The 19 year old is a student at present so has no income at the moment other than what he gets from any other savings he may have.

Youngest child is only 7, his gain is around £4k so far.  We have persuaded his Mum to open a S&S JISA so we are now moving some of his cash savings gradually into that.  We will see how that performs before deciding what to do with his HL fund.

I saw it said somewhere that any acquisition and selling costs can be deducted for CGT purposes, does that mean things like dealing fees?    As you will have gathered, I do not have much knowledge about this sort of thing, so your advice is much appreciated.

BIB; you can deduct costs directly related to the transactions.

This is usually only dealing commission and, where relevant, stamp duty. You cannot deduct general, ongoing stockbroker account fees.