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Declaring money given to my wife for her ISA

Practical Issues
TheMotorcycleBoy
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Declaring money given to my wife for her ISA

#452674

Postby TheMotorcycleBoy » October 24th, 2021, 1:57 pm

Hi folks,

My wife is currently earning a figure close to the minimum wage, and has no requirement to file a tax return. I however, have recently been asked to file a tax return (for year ending April 2021). I wondered if I am required to declare that I have given £20k of my salary to Mel over the course of that year which she then subsequently invested in her own Stocks and Shares ISA.

Can anyone on this board advise me as to whether I am legally required to report this "gift" ?

thanks Matt

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Re: Declaring money given to my wife for her ISA

#452675

Postby Lootman » October 24th, 2021, 2:02 pm

There is no requirement to report any gift at the time, or in the year of that gift. If you die within 7 years of the gift then your executor may be expected to report the gift if IHT is payable.

More specifically, financial transactions between spouses are generally not deemed to be tax events. HMRC takes the view that it is normal and natural for money to go back and forth between married couples. So a married couple may organise their funds and assets in such a way as to minimise taxation e.g. by transferring assets to the spouse who is in the lower tax bracket.

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Re: Declaring money given to my wife for her ISA

#452678

Postby TheMotorcycleBoy » October 24th, 2021, 2:08 pm

Lootman wrote:There is no requirement to report any gift at the time, or in the year of that gift. If you die within 7 years of the gift then your executor may be expected to report the gift if IHT is payable.

More specifically, financial transactions between spouses are generally not deemed to be tax events. HMRC takes the view that it is normal and natural for money to go back and forth between married couples. So a married couple may organise their funds and assets in such a way as to minimise taxation e.g. by transferring assets to the spouse who is in the lower tax bracket.

Thanks for this, Lootman,

Am I also correct in assuming that since my dividends and paper gains in my ISA and SIPP are tax sheltered, and currently stay in those accounts (and will until we retire) that none of this activity needs to be reported at present?

Matt

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Re: Declaring money given to my wife for her ISA

#452680

Postby Lootman » October 24th, 2021, 2:11 pm

TheMotorcycleBoy wrote:
Lootman wrote:There is no requirement to report any gift at the time, or in the year of that gift. If you die within 7 years of the gift then your executor may be expected to report the gift if IHT is payable.

More specifically, financial transactions between spouses are generally not deemed to be tax events. HMRC takes the view that it is normal and natural for money to go back and forth between married couples. So a married couple may organise their funds and assets in such a way as to minimise taxation e.g. by transferring assets to the spouse who is in the lower tax bracket.

Thanks for this, Lootman,

Am I also correct in assuming that since my dividends and paper gains in my ISA and SIPP are tax sheltered, and currently stay in those accounts (and will until we retire) that none of this activity needs to be reported at present?

No tax reporting is ever required for a valid ISA. You don't even have to tell HMRC that you have an ISA, let alone what is in it.

I do not have a SIPP and so will defer to others on that topic.

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Re: Declaring money given to my wife for her ISA

#452684

Postby Adamski » October 24th, 2021, 2:27 pm

Yes on your isa and sipp you don't need to declare any gains or divis.

You do need to declare contributions into your sipp, where you get relief at source ie pay in £80, made up to £100.

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Re: Declaring money given to my wife for her ISA

#452689

Postby TheMotorcycleBoy » October 24th, 2021, 2:36 pm

Adamski wrote:Yes on your isa and sipp you don't need to declare any gains or divis.

You do need to declare contributions into your sipp, where you get relief at source ie pay in £80, made up to £100.

Yes, it was due to earlier enquiries of mine in the year, i.e. my claim for HRT relief on my SIPP contribs, which led to me to discussions with HMRC and their request that I file a return.

Matt

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Re: Declaring money given to my wife for her ISA

#452695

Postby stevensfo » October 24th, 2021, 3:24 pm

Lootman wrote:There is no requirement to report any gift at the time, or in the year of that gift. If you die within 7 years of the gift then your executor may be expected to report the gift if IHT is payable.

More specifically, financial transactions between spouses are generally not deemed to be tax events. HMRC takes the view that it is normal and natural for money to go back and forth between married couples. So a married couple may organise their funds and assets in such a way as to minimise taxation e.g. by transferring assets to the spouse who is in the lower tax bracket.


I guess that one way to keep it simple is to have a joint account.

Does the HMRC take a similar view for money given to children? We helped our eldest when he was at uni, not wanting him to start work with a huge debt, and nobody ever commented on how the tuition fees were being paid or the money we put in his account. But when our youngest went, the fees had tripled so although we still helped, he needed a loan. If we wanted, could we pay this off for him, either partially or fully? Would this silly 7-year rule apply?

Steve

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Re: Declaring money given to my wife for her ISA

#452699

Postby Howard » October 24th, 2021, 3:40 pm

stevensfo wrote:
Lootman wrote:There is no requirement to report any gift at the time, or in the year of that gift. If you die within 7 years of the gift then your executor may be expected to report the gift if IHT is payable.

More specifically, financial transactions between spouses are generally not deemed to be tax events. HMRC takes the view that it is normal and natural for money to go back and forth between married couples. So a married couple may organise their funds and assets in such a way as to minimise taxation e.g. by transferring assets to the spouse who is in the lower tax bracket.


I guess that one way to keep it simple is to have a joint account.

Does the HMRC take a similar view for money given to children? We helped our eldest when he was at uni, not wanting him to start work with a huge debt, and nobody ever commented on how the tuition fees were being paid or the money we put in his account. But when our youngest went, the fees had tripled so although we still helped, he needed a loan. If we wanted, could we pay this off for him, either partially or fully? Would this silly 7-year rule apply?

Steve


You are right for a current account paying no interest but could I respectfully disagree on having a joint investment account or any taxable account.

My wife and I have a joint current account for everyday use. However, years ago I made the mistake of setting up a joint investment account and a savings account and it was a pain. Especially filling in a tax return and having to halve things. I closed the joint accounts. Much better to have separate accounts.

And you can give away serious amounts to children eg six figures for house purchases. And gifts to anyone else you choose. There is no tax liability if you live for seven years afterwards.

regards

Howard

PS Keep records if you expect to pass away in the near future!

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Re: Declaring money given to my wife for her ISA

#452703

Postby scrumpyjack » October 24th, 2021, 4:19 pm

re the childrens student loans, an article in the FT says

"Payments to children, including paying off their student loans or tuition fees, are normally exempt from IHT while they are in full-time education."
https://www.ft.com/content/ba24b034-502 ... 19572361bb

I suppose you might have a problem if you pay it off after they have finished their education and the 7 year rule might then apply.

Obviously you might be able to deem the payments as covered by the 'out of income' rule if you are careful.

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Re: Declaring money given to my wife for her ISA

#452718

Postby Lootman » October 24th, 2021, 5:34 pm

scrumpyjack wrote:re the childrens student loans, an article in the FT says

"Payments to children, including paying off their student loans or tuition fees, are normally exempt from IHT while they are in full-time education."
https://www.ft.com/content/ba24b034-502 ... 19572361bb

I suppose you might have a problem if you pay it off after they have finished their education and the 7 year rule might then apply.

Yes, I always took the view that any money I spent supporting my children was not any kind of gift. It was family support. And support typically takes the form of a stream of small payments and acts of generosity, rather than the kind of lump sum that would typically be regarded as a gift under IHT rules.

The rules indicate that is valid until the end of full-time education, although I would imagine that if a child stays in the family home beyond that, and cannot support himself or herself, then continued parental support could not reasonably be deemed to be a gift. I cannot imagine as an executor that I would report such support of a dependent as failed PETs.

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Re: Declaring money given to my wife for her ISA

#452831

Postby TheMotorcycleBoy » October 25th, 2021, 8:40 am

Another thing that I'm uncertain about regards my tax return, is whether I need to mention the sales of my Qualcomm (employee grant) stocks in the CGT summary. I assume that I should despite the fact that since I sold the stocks as soon as they vested, I actually made a small loss. But my concern is that I had to employ some lateral thinking in order to make HMRC boxes match my reality.

The story is as follows. Twice a year I'm given a number X of shares, but in order to cover my income tax ETrade (the broker we have to use) sells a reasonable portion of these leaving Y number of shares and a small amount of $ change. This happens as soon as the shares vest. As far as I'm concerned the residual Y number of shares and the change represent income which has already been taxed. I then sell these shares at once (on vesting day), typically making a small loss. Then I bring the money back to the UK at that point converting into GBP in the process.

Hence in my opinion I have 2 figures 1) the converted to GBP values of my stocks when they vested and 2) the proceeds I ended up with after the sales.

In that case should I enter my figure 1) (value at vesting) into box "25. Allowable cost (including purchase price)" and figure 2) (my final proceeds) into box "24. Disposal proceeds" ?

thanks again,
Matt

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Re: Declaring money given to my wife for her ISA

#452858

Postby servodude » October 25th, 2021, 10:31 am

Howard wrote:My wife and I have a joint current account for everyday use. However, years ago I made the mistake of setting up a joint investment account and a savings account and it was a pain. Especially filling in a tax return and having to halve things. I closed the joint accounts. Much better to have separate accounts.


Absolutely agree - and we've ended up in the same position after a call from the tax dude post a tax return

For a long time now we've had separate and joint accounts with the same bank and we just treat them as different logins to look at our stuff
- to us they're all "joint" but it makes tax a bit simpler (and less)

Suppose it means keeping the wife (and vice versa) so every silver lining has a silver lining :D

- sd

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Re: Declaring money given to my wife for her ISA

#452917

Postby TheMotorcycleBoy » October 25th, 2021, 1:21 pm

Lootman wrote:
TheMotorcycleBoy wrote:
Lootman wrote:There is no requirement to report any gift at the time, or in the year of that gift. If you die within 7 years of the gift then your executor may be expected to report the gift if IHT is payable.

More specifically, financial transactions between spouses are generally not deemed to be tax events. HMRC takes the view that it is normal and natural for money to go back and forth between married couples. So a married couple may organise their funds and assets in such a way as to minimise taxation e.g. by transferring assets to the spouse who is in the lower tax bracket.

Thanks for this, Lootman,

Am I also correct in assuming that since my dividends and paper gains in my ISA and SIPP are tax sheltered, and currently stay in those accounts (and will until we retire) that none of this activity needs to be reported at present?

No tax reporting is ever required for a valid ISA. You don't even have to tell HMRC that you have an ISA, let alone what is in it.

I do not have a SIPP and so will defer to others on that topic.

Hi Lootman,

Do you (or anyone else) know the answer to this one viewtopic.php?p=452831#p452831 ?

thanks Matt

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Re: Declaring money given to my wife for her ISA

#452935

Postby genou » October 25th, 2021, 2:16 pm

TheMotorcycleBoy wrote:Another thing that I'm uncertain about regards my tax return, is whether I need to mention the sales of my Qualcomm (employee grant) stocks in the CGT summary. ... Twice a year I'm given a number X of shares, but in order to cover my income tax ETrade (the broker we have to use) sells a reasonable portion of these leaving Y number of shares and a small amount of $ change. This happens as soon as the shares vest. As far as I'm concerned the residual Y number of shares and the change represent income which has already been taxed. I then sell these shares at once (on vesting day), typically making a small loss. Then I bring the money back to the UK at that point converting into GBP in the process.

thanks again,
Matt


What sort of a scheme is it ? There is a reasonably intelligible analysis here -

https://uk.practicallaw.thomsonreuters.com/1-503-1411?transitionType=Default&contextData=(sc.Default)&firstPage=true

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Re: Declaring money given to my wife for her ISA

#452969

Postby TheMotorcycleBoy » October 25th, 2021, 4:26 pm

genou wrote:
TheMotorcycleBoy wrote:Another thing that I'm uncertain about regards my tax return, is whether I need to mention the sales of my Qualcomm (employee grant) stocks in the CGT summary. ... Twice a year I'm given a number X of shares, but in order to cover my income tax ETrade (the broker we have to use) sells a reasonable portion of these leaving Y number of shares and a small amount of $ change. This happens as soon as the shares vest. As far as I'm concerned the residual Y number of shares and the change represent income which has already been taxed. I then sell these shares at once (on vesting day), typically making a small loss. Then I bring the money back to the UK at that point converting into GBP in the process.

thanks again,
Matt


What sort of a scheme is it ? There is a reasonably intelligible analysis here -

https://uk.practicallaw.thomsonreuters.com/1-503-1411?transitionType=Default&contextData=(sc.Default)&firstPage=true

Hi Genou,

Qualcomm is an American firm, and we have to dance to their tune. I followed your link and the type of scheme that sounds the best fit is "Share Incentive Plan - Free shares". I guess that they *aren't* options because we don't actually buy the shares, they just appear in an account. Basically it's how I described above, i.e. we are all given an ETrade employee brokerage account, and that's where this part of our "rewards" appear, and thus we have to manage it ourselves once Qualcomm and Etrade figure out the income tax and NI part (see my following 1.)

1. According to ones position+performance we are periodically given X shares. Since these are part of our remuneration package there are income essentially, so X times about 0.45 of these shares are immediately sold by Etrade when the shares vest, and monies used to pay the UK income tax and NI. Those sale orders are called "restricted stock unit sell-to-cover" orders, and AFAIK that's standard fare in the US. Etrade pass this money back to our payroll, I assume, so that they can deal with each employees tax and NI relating to the implied income due to these "free shares".

2. We then have approximately 0.55 * X shares left in the brokerage account. Up to each employee what to do with these. Some people accumulate the divs and the holdings, since we get tranches allocated each year (each of which vest in separate bi-annual lots over a 3 year period). I sell mine immediately at vesting date, in order to hopefully avoid CGT hassles with various differing FX rates, and also because I'd rather get the money back into my UK-facing ISA and SIPP.

So I'm thinking the GBP value of my holdings (after the sell-to-cover sales for tax/ni) is what I put box "25. Allowable cost (including purchase price)" on my CGT summary and the GBP value of the money I receive after share sales and FX conversion costs is what I put in box "24. Disposal proceeds". Does that make sense?

What this would imply is that for someone who lets their stocks accumulate for 5 years after vesting before they sell, then we they do their equivalent

box 24. minus box 25. they will get a reasonable size positive number - and that would be their "capital gain".

However for me, when I make the same subtraction I get a small negative number, since I sell straight after vesting date, and hence see only the costs and no gain on the shares over on the NASDAQ.

Does that help you help me answer my question?

thanks Matt

PS I wish they'd just give me the money!

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Re: Declaring money given to my wife for her ISA

#452985

Postby TheMotorcycleBoy » October 25th, 2021, 5:57 pm

UPDATE:
I phoned HMRC. They said that I'm correct in my assumptions (i.e. what I've insinuated above). But since I've a CG loss I don't need to declare it.

Matt


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