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CGT, share transfer to spouse, subsequent disposal.

Practical Issues
sloth
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CGT, share transfer to spouse, subsequent disposal.

#395104

Postby sloth » March 13th, 2021, 3:32 am

I understand that if I transfer shares to my spouse there is no CGT to pay.

If she subsequently sells them, then the cost of them is deemed to be what they were originally bought at by me in order to assess the gain.

What if at the time of transfer, she already owns some of the same shares bought at a different price? Does the transfer give rise to a s104 holding with a pooled cost?

scrumpyjack
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Re: CGT, share transfer to spouse, subsequent disposal.

#395119

Postby scrumpyjack » March 13th, 2021, 8:36 am

sloth wrote:I understand that if I transfer shares to my spouse there is no CGT to pay.

If she subsequently sells them, then the cost of them is deemed to be what they were originally bought at by me in order to assess the gain.

What if at the time of transfer, she already owns some of the same shares bought at a different price? Does the transfer give rise to a s104 holding with a pooled cost?


Yes except that shares covered by bed and breakfast rules do not enter the pool, ie if sold within 30 days of acquisition.

https://www.gov.uk/hmrc-internal-manual ... al/cg51570

On the other hand if you are deemed to have acquired them at spouse's cost and acquisition date, maybe the 30 day rule would not apply?

Gengulphus
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Re: CGT, share transfer to spouse, subsequent disposal.

#395157

Postby Gengulphus » March 13th, 2021, 10:43 am

sloth wrote:I understand that if I transfer shares to my spouse there is no CGT to pay.

If she subsequently sells them, then the cost of them is deemed to be what they were originally bought at by me in order to assess the gain.

What if at the time of transfer, she already owns some of the same shares bought at a different price? Does the transfer give rise to a s104 holding with a pooled cost?

Treat the transfer as a disposal by you of the shares, and an acquisition of the same asset by your spouse. The only change from the normal rules is that the amount your spouse pays you for them (including the case that it's £0.00, i.e. that the transfer is a gift) is ignored. Instead, you work out which acquisitions of yours the disposal-by-transfer would match under the normal share-matching rules, and treat the disposal-by-transfer as having been made at precisely your total allowable costs for those shares, and also treat your spouse's acquisition-by-transfer as having been made for that same amount.

E.g. suppose the details of your holding history end up being:

01/07/2020: Acquired 3000 shares at 100p each (including trading costs), i.e. for a total of £3k
01/03/2021: Acquired 7000 shares at 200p each (including trading costs), i.e. for a total of £14k
12/03/2021: Transferred 4000 shares to spouse
02/04/2021: Acquired 2000 shares at 150p each (including trading costs), i.e. for a total of £3k
(no more acquisitions up to and including 11/04/2021, the 30th day after the transfer)

Then the 01/07/2020 acquisition creates a 'pool' of 3000 shares acquired for £3k, and the 01/03/2021 acquisition increases that to 10000 shares acquired for £17k. The fact that the disposal-by-transfer happens within the following 30 days does not matter: the 30-day rule applies to acquisitions within the 30 days following a disposal, not to disposals within the 30 days following an acquisition.

Then the 12/02/2021 disposal-by-transfer needs to be matched, and since the 02/04/2021 acquisition is within the 30 days after it, the 30-day rule does apply to it: 2000 of the 4000 shares transferred to your spouse are treated as though she paid you £3k for them. There are no more acquisitions to which the 30-day rule applies, so the remaining 2000 transferred shares come from your pool - since they're 20% of your pool, they're treated as though she paid you 20% of £17k = £3.4k for them. So overall, your disposal-by-transfer is treated as though you'd received £3k + £3.4k = £6.4k for the 4000 shares transferred - which because it is exactly the total of the acquisition costs produced by the share-matching rules, means that your CGT computation for the disposal-by-transfer comes out as £6.4k disposal proceeds - £6.4k allowable costs = £0 gain/loss.

And your spouse's acquisition-by-transfer is also treated as though she'd paid you £6.4k for the 4000 acquired shares, with that acquisition being processed as normal by the share-matching rules. If she disposes of those shares on the day of the transfer or on any of the preceding 30 days, the same-day and/or 30-day rules will apply to her calculation of her realised gain/loss from those disposals. Otherwise, the acquisition-by-transfer will merge into her pool, just like any other acquisition that the same-day and 30-day rules don't match to any disposal.

In short, to keep the CGT computations as simple as possible, you should not acquire the same type of share on the day of the transfer or any of the following 30 days, and your spouse should not dispose of the same type of share on the day of the transfer or any of the preceding 30 days. Ignoring this won't change the fact that the disposal-by-transfer and acquisition-by-transfer are both treated as happening at the sum of your allowable costs for the transferred shares, and consequently won't change the fact that you're treated as making neither a gain nor a loss on the disposal-by-transfer. But it will complicate the computations by bringing the same-day and/or 30-day rules into the calculation of what the sum of those allowable costs is, or into the calculation of your spouse's realised gains/losses, or both.

Gengulphus

sloth
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Re: CGT, share transfer to spouse, subsequent disposal.

#395974

Postby sloth » March 16th, 2021, 12:03 am

Many thanks for the helpful replies. Much appreciated!


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