Reporting of CGT inter-spouse transfers

[helfordpirate]

Hi
Trying to find a definitive answer on the requirement to report inter spouse transfers for SA CGT.

Clearly an inter spouse transfer is on a no gain no loss basis i.e the value of the disposal is the base cost and the transferee has that same base cost. Nevertheless it is still a disposal - though never producing a CGT liability.

As far as I can see TMA S8C is clear that such disposals do not count towards triggering the reporting requirements of total disposals > 4x CGT allowance. However, if the requirement to report CGT is otherwise triggered, Google searches suggest you are required to report these inter spouse disposals e.g Tolleys Some however say if asked HMRC say not.

With the upcoming crunch on CGT, i have done a lot of reorganising asset locations. Reporting it all feels like asking HMRC to do an enquiry.

Anyone researched this or have any specific experience?
thanks

[scrumpyjack]

Hi
Trying to find a definitive answer on the requirement to report inter spouse transfers for SA CGT.

Clearly an inter spouse transfer is on a no gain no loss basis i.e the value of the disposal is the base cost and the transferee has that same base cost. Nevertheless it is still a disposal - though never producing a CGT liability.

As far as I can see TMA S8C is clear that such disposals do not count towards triggering the reporting requirements of total disposals > 4x CGT allowance. However, if the requirement to report CGT is otherwise triggered, Google searches suggest you are required to report these inter spouse disposals e.g Tolleys Some however say if asked HMRC say not.

With the upcoming crunch on CGT, i have done a lot of reorganising asset locations. Reporting it all feels like asking HMRC to do an enquiry.

Anyone researched this or have any specific experience?
thanks

I have never bothered to report them but have kept my own records. I have taken the view that they are not chargeable disposals.
The HMRC notes to completing the return do not, AFAIAA, make any reference to a need to report them.

As there is no gain on making a gift to one's spouse, I take the view that they do not fall under the Capital Gains reporting requirement. The spouse is treated as having acquired them at the gifting spouse's acquisition cost and date.

[Lootman]

I have never bothered to report them but have kept my own records. I have taken the view that they are not chargeable disposals. The HMRC notes to completing the return do not, AFAIAA, make any reference to a need to report them.

As there is no gain on making a gift to one's spouse, I take the view that they do not fall under the Capital Gains reporting requirement. The spouse is treated as having acquired them at the gifting spouse's acquisition cost and date.

I would agree. Although is it possible that it may be different if the spouse is a non-dom, which can raise potential IHT issues?

[Dod101]

Is it correct that all inter spouse transfers are gifts? Is that not bold assumption? I no longer have a spouse so that is does not affect me. Just musing really.

Dod

[scrumpyjack]

Is it correct that all inter spouse transfers are gifts? Is that not bold assumption? I no longer have a spouse so that is does not affect me. Just musing really.

Dod

In my case they have all been gifts, but anyway:

Per HMRC
Your spouse or civil partner
You do not pay Capital Gains Tax on assets you give or sell to your husband, wife or civil partner, unless: you separated and did not live together at all in that tax year. yo u gave them goods for their business to sell on.

[helfordpirate]

Thanks for the replies.

It is clear that there is no tax to pay on such transfers.

However, they are still disposals for CGT purposes - it is just that the value used for the disposal is set to the base cost (hence no gain/no loss) as opposed to the actual price received for arms length disposals, or the market value for disposals to connected persons.

Just because there is no tax impact is not a reason not to report it. For example, if I bought and sold some shares and it happened that they were at the same price, there is no gain or loss but it is still reportable (once one of the two reasons for triggering CGT reporting has been met).

This is what Tolleys says "The transfer of the asset between spouses has to be reported on the transferor spouse's tax return if they have other chargeable gains in excess of the reporting threshold or the annual exempt amount." (Its behind a pay wall so I cant see any more details.) They are a solid source but when I try to find confirmation of this in actual HMRC guidance or legislation I come up with nothing.

Suspect it is probably one of those things where technically you are supposed to do it but in reality HMRC neither expect it or insist on it. I will continue maintaining my own records, including letters for each spouse confirming the gifts and formal transfer of the beneficiaries interest by the stockbrokers.

[Dod101]

T. I will continue maintaining my own records, including letters for each spouse confirming the gifts and formal transfer of the beneficiaries interest by the stockbrokers.

Just as a matter of interest, how many spouses do you have?

Dod

[scrumpyjack]

However, they are still disposals for CGT purposes - it is just that the value used for the disposal is set to the base cost (hence no gain/no loss) as opposed to the actual price received for arms length disposals, or the market value for disposals to connected persons.

Perhaps but then the date of the transaction could be viewed as being the original acquisition date as the spouse 'inherits' not just the cost but also the acquisition date! (That mattered when there was indexation relief etc).

I suspect that if Tolleys say so there is some statutory basis for their view, or perhaps it is just the absence of any legislation saying it isn't a relevant disposal?

[helfordpirate]

Just as a matter of interest, how many spouses do you have?

Dod

You jest! But HMRC takes polygamy seriously....from the CGT Manual CGT22070

"A polygamous marriage may be recognised as valid in United Kingdom law if it was valid in the country in which the ceremony occurred and, broadly, it was contracted by persons domiciled in that country. In these circumstances the spouses will be connected with each other under Section 286(2). A transfer between spouses living together will be within TCGA92/S58 and so will be at no gain/no loss."

Much more opportunity for tax planning!

[Lootman]

However, they are still disposals for CGT purposes - it is just that the value used for the disposal is set to the base cost (hence no gain/no loss) as opposed to the actual price received for arms length disposals, or the market value for disposals to connected persons.

Perhaps but then the date of the transaction could be viewed as being the original acquisition date as the spouse 'inherits' not just the cost but also the acquisition date! (That mattered when there was indexation relief etc).

Acquisition date is not required to be reported any more. The form asks for it but you can just leave it blank.

As you note, there is no need for it any more as the time period of holding is no longer a factor.

[Arborbridge]

Leading on from this, supposing my spouse gifts some shares to me but they are in her name in her broker account? Can they really be considered "mine" in that case as the broker believes they are "hers", or would they have to be sold, thus triggering a CGT event?

The way the thread reads, it's a simple as her deeming them to be mine so that 2x the CGT allowance of £12300 could be sold off in her non-sheltered account without mentioning to anyone.

That sounds unlikely, although one might argue that it's no concern of a broker which of the two of us actually own them.

Arb.

[helfordpirate]

Leading on from this, supposing my spouse gifts some shares to me but they are in her name in her broker account? Can they really be considered "mine" in that case as the broker believes they are "hers", or would they have to be sold, thus triggering a CGT event?

The way the thread reads, it's a simple as her deeming them to be mine so that 2x the CGT allowance of £12300 could be sold off in her non-sheltered account without mentioning to anyone.

That sounds unlikely, although one might argue that it's no concern of a broker which of the two of us actually own them.

Arb.

The gift needs to be seen to be "real". So I would suggest:

- your wife needs to instruct her broker to transfer the shares to you. This can usually be done online if you both have the same broker. If not you should do an inter specie transfer. You don't sell them.
- your wife writes a letter saying she has decided to gift you the shares absolutely. So you have a paper trail.

In theory, your wife can gift you the beneficial interest absolutely and continue to hold them as trustee. However, that would probably need more documentation if it were challenged. Also most brokers need to know who the beneficial owner is ("know your customer" rules), so they won't like it.

I find it is the matter of a few minutes work to keep it all squeaky clean...

[Arborbridge]

Leading on from this, supposing my spouse gifts some shares to me but they are in her name in her broker account? Can they really be considered "mine" in that case as the broker believes they are "hers", or would they have to be sold, thus triggering a CGT event?

The way the thread reads, it's a simple as her deeming them to be mine so that 2x the CGT allowance of £12300 could be sold off in her non-sheltered account without mentioning to anyone.

That sounds unlikely, although one might argue that it's no concern of a broker which of the two of us actually own them.

Arb.

The gift needs to be seen to be "real". So I would suggest:

- your wife needs to instruct her broker to transfer the shares to you. This can usually be done online if you both have the same broker. If not you should do an inter specie transfer. You don't sell them.
- your wife writes a letter saying she has decided to gift you the shares absolutely. So you have a paper trail.

In theory, your wife can gift you the beneficial interest absolutely and continue to hold them as trustee. However, that would probably need more documentation if it were challenged. Also most brokers need to know who the beneficial owner is ("know your customer" rules), so they won't like it.

I find it is the matter of a few minutes work to keep it all squeaky clean...

Thank you. I'll look into doing it that way.

I had an LOL moment with the first sentence thinking of Prince Harry saying words to the effect that his memory is what it is, and defines what is real. But that's another topic...

Arb.

[AJC5001]

Leading on from this, supposing my spouse gifts some shares to me but they are in her name in her broker account? Can they really be considered "mine" in that case as the broker believes they are "hers", or would they have to be sold, thus triggering a CGT event?

Arb.

Further question -
What is the situation when the shares are held in a joint account? Are they assumed to be owned equally by both account holders? Could any such sales 'compromise' the CGT situation when one of the joint owners also sells shares held in a single personal account?

Adrian

[doug2500]

I have a joint account for this very reason and it works very well. Generally I dematerialise my certificates into an account in my name (you can't go straight to joint as the name has to match) then when cleared (a few days) I send a message to the broker (same broker if there's any doubt) saying I would like to transfer the shares into the joint account and it should be considered a gift to my wife with regards to the half share that will now be in her name.

Then when the time comes it's clear they're jointly held, and there's no charges to do this.

I presume if you additionally sell shares in your own name the proceeds would have to be added to the half share. This may or not be easy depending on any other complications e.g. 30 day rule?

[fisher]

I have a joint account for this very reason and it works very well. Generally I dematerialise my certificates into an account in my name (you can't go straight to joint as the name has to match) then when cleared (a few days) I send a message to the broker (same broker if there's any doubt) saying I would like to transfer the shares into the joint account and it should be considered a gift to my wife with regards to the half share that will now be in her name.

Then when the time comes it's clear they're jointly held, and there's no charges to do this.

I presume if you additionally sell shares in your own name the proceeds would have to be added to the half share. This may or not be easy depending on any other complications e.g. 30 day rule?

Which broker do you use for this please?

[scrumpyjack]

My wife and I have long been clients of HL and whenever we wish to make such inter spouse transfers, we simply secure message them telling them what to do and confirming the transfer is a gift. They make no charge for this. I also tell them what the deadline date for the transfer is because often I do it for tax planning purposes so the transfer needs to be done before the XD date.

One does have to watch what they record as 'cost' as they have a tendency to apply the transfer at the market value on the date of transfer. I have my own system for recording our investments which has the correct CGT cost details for everything, and ignore the brokers cost values.

This means there is an 'audit' trail of all such gifts, should the taxman query anything.

[doug2500]

I have a joint account for this very reason and it works very well. Generally I dematerialise my certificates into an account in my name (you can't go straight to joint as the name has to match) then when cleared (a few days) I send a message to the broker (same broker if there's any doubt) saying I would like to transfer the shares into the joint account and it should be considered a gift to my wife with regards to the half share that will now be in her name.

Then when the time comes it's clear they're jointly held, and there's no charges to do this.

I presume if you additionally sell shares in your own name the proceeds would have to be added to the half share. This may or not be easy depending on any other complications e.g. 30 day rule?

Which broker do you use for this please?

HL. Their pricing is fine as long as you don't hold funds. When I ask them to transfer I also tell them what price to put against them and they use this rather than the price on transfer date.

[International]

Hi,

I want to do this with my (UK) spouse so we can take advantage of both our (diminishing) GCT allowances. For the avoidance of doubt, I do not maintain spouses in other jurisdictions!

I appreciate the audit trail of having two broker accounts, one in each name, and explicitly transferring the shares between them to demonstrate the gifting.

However, the shares I want to transfer are US shares held in a US broker. I don't really want the hassle of getting my wife a US broker, her becoming a Non-Resident Alien, getting her to do W8-BEN and receiving confusing letters from the US when I have shuffled off this mortal coil.

Has anyone gone down the route of just selling the shares yourself and somehow officially documenting that you gifted them?

[DrFfybes]

Has anyone gone down the route of just selling the shares yourself and somehow officially documenting that you gifted them?

I'm pretty sure the rule for gifting shares requires exactly that, gifting of shares. AIUI It is the person making the sale who realises the gain, otherwise there would be the much simpler situation of a joint spousal transferrable CGT allowance.

Paul