CGT on shares - LIFO and transferring to spouse

fagun

Does anyone know how transferring shares to a spouse interacts with the LIFO principle?

Are shares transferred considered to be the last ones that have been acquired in the company?

If you subsequently sell some shares in the same company, can you claim taper relief as they are the older shares?

I am trying to help my father-in-law out with selling shares that he has accumulated over the years through company schemes.

He's going to transfer some shares to my mother-in-law to make use of both of their allowances. However, I was also wondering if we can use the transfers, so that he can sell the shares that have the most taper relief before taper relief disappears next year.

Thanks for any information. The tax office is being slow in responding.

Pennywise

If you have the share certificates for the older shares, make sure that they are the ones that you transfer, i.e. send those older shares to the registrars and get them transferred to your spouse - obviously keep copies, etc. That way there is no doubt as to which shares were transferred. It is not for HMRC to argue about - the facts would be that you gave your spouse the older shares - fact.

It is only when shares are sold that the apportionment rules apply - giving shares to a spouse - they are transferred exactly in the form and manner of ownership/dates/costs etc as the transferring spouse.

A point to watch for though is that if you were hoping to claim business asset taper relief in the shares rather than normal non-business asset taper relief, your spouse would lose the valuable "business asset" enhancement if they didn't qualify in the same way you would, i.e. as an employer or director of the company.

fagun

Pennywise wrote: »

If you have the share certificates for the older shares, make sure that they are the ones that you transfer, i.e. send those older shares to the registrars and get them transferred to your spouse - obviously keep copies, etc. That way there is no doubt as to which shares were transferred. It is not for HMRC to argue about - the facts would be that you gave your spouse the older shares - fact.

It is only when shares are sold that the apportionment rules apply - giving shares to a spouse - they are transferred exactly in the form and manner of ownership/dates/costs etc as the transferring spouse.

A point to watch for though is that if you were hoping to claim business asset taper relief in the shares rather than normal non-business asset taper relief, your spouse would lose the valuable "business asset" enhancement if they didn't qualify in the same way you would, i.e. as an employer or director of the company.

Thanks for the response. The shares are dematerialised, so it is a case of instructing the brokers to transfer them.

My understanding is that the business asset relief also carries through upto the point of transfer, though you have to prorata the gain between business asset and non-business asset. None of the shares are business assets now, though some were for a few years from Apr 2000 (when the rules changed) - I suppose all of this is moot once the rules change in April.