Transferring shares for tax purposes

[NearlyThere]

Hi,

From a post on another board (viewtopic.php?p=364839#p364839), I'm told i can “transfer” shares for tax purposes by simply declaring that I hold them on trust for my spouse.

How do I go about making that declaration? Is it simply a comment on my tax return, or something more specific?

My wife has no income, so we'd like to use her tax allowances. The shares are held in a corporate sponsored nominee account, dividends are ~£8k / year.

She's not currently required to file a tax return, so I'm also unsure how we would declare the income.

Thanks for any help.

[Adamski]

The steps are a) bed and spouse, b) bed and isa, then c) declare to hmrc.

What I'd do is.... complete the necessary stock transfer form to transfer the shares to your wife. Then "bed and ISA", to transfer 20k to an isa also in her name. None of that has CGT as between spouses.

Then to declare dividends without tax return,... after the end of tax year, the investment provider suppliers an income statement around July showing dividends outside of an ISA. Your wife should call hmrc and inform them by phone of the dividends received outside of an isa. The amount over the dividend allowance of 2k will be taxable. For 21-22 basic rateon dividends is 7.5%. Cheers, Adam

[Gengulphus]

The steps are a) bed and spouse, b) bed and isa, then c) declare to hmrc.

What I'd do is.... complete the necessary stock transfer form to transfer the shares to your wife. Then "bed and ISA", to transfer 20k to an isa also in her name. None of that has CGT as between spouses.

Then to declare dividends without tax return,... after the end of tax year, the investment provider suppliers an income statement around July showing dividends outside of an ISA. Your wife should call hmrc and inform them by phone of the dividends received outside of an isa. The amount over the dividend allowance of 2k will be taxable. ...

I very much doubt that it will be, because NearlyThere's wife has no income at present - so unless for some reason she also has no (or very little) personal allowance, the dividends will not be taxable due to her personal allowance, without even needing to look at the personal allowance. Indeed, at present the ISA also isn't necessary - though I would definitely recommend using it, because I know from personal experience that one can end up regretting not making use of such allowances even if there was no obvious reason to use them at the time.

The main issue that strikes me is that the "corporate sponsored nominee account" probably has rules about which types of transfer it will and won't do. Not knowing which such account it is (and indeed not knowing for certain what the "corporate sponsored" part of the description is about), I have no chance of producing any sort of answer to that - but my suggestion would be to ask the account provider whether it's possible, and if so, how to go about it.

Gengulphus

[NearlyThere]

I very much doubt that it will be, because NearlyThere's wife has no income at present - so unless for some reason she also has no (or very little) personal allowance, the dividends will not be taxable due to her personal allowance, without even needing to look at the personal allowance. Indeed, at present the ISA also isn't necessary - though I would definitely recommend using it, because I know from personal experience that one can end up regretting not making use of such allowances even if there was no obvious reason to use them at the time.

The main issue that strikes me is that the "corporate sponsored nominee account" probably has rules about which types of transfer it will and won't do. Not knowing which such account it is (and indeed not knowing for certain what the "corporate sponsored" part of the description is about), I have no chance of producing any sort of answer to that - but my suggestion would be to ask the account provider whether it's possible, and if so, how to go about it.

Gengulphus

The nominee account is with Equiniti and there is a process to formally transfer into my wife's name, but I was hoping that a simpler "declaration" may have been sufficient for tax purposes. She is not using any of her personal allowances.

The plan is to sell the shares over the next few years and move funds into global tracker ETF's inside ISA's.

Thanks,
NT

[Adamski]

...I was hoping that a simpler "declaration" may have been sufficient for tax purposes. She is not using any of her personal allowances...

My understanding is that each spouse in a marriage is treated for tax as an individual person and taxed independently. So you would need to transfer the shares (unless someone knows otherwise!), but as inter-spouse they're be no tax to pay. Agree with above no divi tax to pay as use personal allowance after dividend allowance if no other income. (As an aside, more important than ever to maximise tax allowances for the whole family whilst still available if/when new govt could be withdrawn.) Cheers

[scrumpyjack]

I don't know about other platforms but with HL she can open a fund and share account with them, for which there are no charges, and you can then transfer the shares from your account to hers, again with no charges. So this makes it all legal and recorded at no cost.

[Gengulphus]

The main issue that strikes me is that the "corporate sponsored nominee account" probably has rules about which types of transfer it will and won't do. Not knowing which such account it is (and indeed not knowing for certain what the "corporate sponsored" part of the description is about), I have no chance of producing any sort of answer to that - but my suggestion would be to ask the account provider whether it's possible, and if so, how to go about it.

The nominee account is with Equiniti ...

Thanks - I think I can now guess with reasonable certainty that the "corporate sponsored" part of the description indicates that the company the shares are in pays Equiniti not just to act as their share registrar, but also to run a low-cost-for-the-shareholder nominee account in which any shareholder of that company can choose to hold their shares. If so, it's equivalent to nominee brokers' nominee accounts as far as this question is concerned.

...and there is a process to formally transfer into my wife's name, but I was hoping that a simpler "declaration" may have been sufficient for tax purposes. ...

My guess is that if a simple declaration will do the job (which I am not certain it will, though I don't see any reason why not), making it in the 'Further Information' box of your tax return (and making it again in each future tax return while the situation persists) would be enough.

But if you do it that way, I suspect that HMRC's automatic systems are likely to flag your tax returns as underdeclaring your dividend income each year. If their more human systems do their job well, they'll notice that the entry in the 'Further Information' box explains the apparent discrepancy and not bother you about it - but I wouldn't bet on them not instead simply firing off a letter to you asking you to explain it...

And if they do notice the entry in the 'Further Information' box, I wouldn't bet on them not firing off a letter to you asking you to explain the nature of the trust and for evidence that the trust is real and not a convenient fiction...

So personally, I would make the formal transfer into your wife's name - it's a bit more hassle right now, but I doubt that it's all that much, and making the ownership of the shares as seen by Equiniti match the responsibility for the tax on them will probably save you more in the long run.

Gengulphus

[Tara]

Hi,

From a post on another board (viewtopic.php?p=364839#p364839), I'm told i can “transfer” shares for tax purposes by simply declaring that I hold them on trust for my spouse.

How do I go about making that declaration? Is it simply a comment on my tax return, or something more specific?

My wife has no income, so we'd like to use her tax allowances. The shares are held in a corporate sponsored nominee account, dividends are ~£8k / year.

She's not currently required to file a tax return, so I'm also unsure how we would declare the income.

Thanks for any help.

I understood that a simple letter of transfer between husband and wife was sufficient to transfer the shares, and even a verbal agreement or understanding between husband and wife was also sufficient.

The stockbroker nominee or trustee is the legal owner of the shares that they hold, and so they will not always know for sure who is the beneficial owner of all the shares that they hold in trust.