gifting of capital gains allowance

spaggy

My neighbour mentioned something about 'gifting' her and her husbands capital gains allowance to her parents so that when they come to sell one of their investment properties they won't be liable to pay as much. It has been drawn up through a solicitor and basically my neighbours parents will give the 'gift' back, its a paper exercise to save paying tax.

This was news to me and I wondered if there is anyone out there who can explain how this works and what are the implications for the person who has it gifted to them. Can you do this each year? can you gift to your children?

I would really appreciate an explanation as it seems to good to be true!! :rolleyes:

Thanks very much

telly-addict

Your neighbour may be confusing capital gains tax (CGT) with inheritance tax (IHT). A person cannot transfer their capital gains tax exemption to anyone else. With IHT, you can structure your will so that you use the nil rate band effectively. If you leave everything to your spouse you waste the nil rate band, because assuming you are both domiciled in the UK, spouse to spouse transfers are exempt. Generally anything that has no real purpose and is only to avoid tax is frowned upon by the Revenue and will be ignored. You need more information, it sounds very confusing to me!

sneekymum

Sounds like total nonsense.

klondyke

Probably not the same situation and rules may have changed, but several years ago when MIL wanted to gift assets to sons (hoping she would stay alive 7 years, or whatever it was then - anyway, she did!) the gifts would have attracted CGT as well as potential IHT. Declaration was made that to the effect that any CGT would be attritutable to respective donees rather than donor paying it. (Seems that was a fairly normal thing to do at the time). Anyway, since each son was then assessed for half this CGT - and it came within their allowances, none was paid. I seem to remember also that there still could have been a liability, but since some of the gift involved selling shares, trades were arranged on April 5th and April 6th to allocate some CGT to each tax year.