CGT Planning

[Joe45]

Our non-tax sheltered investments are in my wife's name for tax planning reasons, as she is a non-earner. Each year she makes use of her annual CGT allowance using the bed & ISA process.

She then transfers to me other investments that are pregnant with £12,000 in gains. This inter-spouse transfer is tax neutral. I then sell the investments to harvest my own annual CGT allowance. I then pass the cash proceeds back to the wife who re-invests in something similar.

We are both on iWeb and the process works smoothly enough, but I'm considering a short cut. Rather than have her actually transfer the investments to me, she could declare that she holds them on trust for me. She then (with my consent) sells the investments and as the beneficiary under the trust, the cash proceeds are mine. I then pass the cash back to her to reinvest as above.

Legally this appears to work. There will be an audit trail comprising a simple bare trust deed and perhaps a letter of wishes from me. It's then up to us to make the appropriate declarations in our tax return (if indeed we need to do this).

Legally this should work. Has anyone else used this approach? Any thoughts?

[Dod101]

My thought is, 'Why bother?'

Dod

[1nvest]

she could declare that she holds them on trust for me.

Guessing that you'd have to employ a solicitor to legally record/witness that declaration of trust. If so maybe a £300 fee (whatever). Or can you DIY that, perhaps using a neighbour/other-independent-witness?

[scrumpyjack]

HL deal with transfers between my wife and I promptly and with no charge. The automated data they send to the revenue will then tie in with our disposal transactions

Can't see the point of declarations of trust, though I don't think it needs a solicitor

[EthicsGradient]

Is declaring that certain of the investments in her account are held in trust for you, while others aren't, this year, definitely, positively allowed? And then allowed again the next year for different ones? And is that process of declaring them, and recording it to the standard needed for a trust, easier than the transfers you're doing now?

[scrumpyjack]

Normally if you give shares to someone but keep them in your name, the holding would be registered in your name a/c initials of beneficial owner.
That is what happens with shares I hold with HL as bare trusteee for my grandchildren

[1nvest]

Could introducing trusts arrangements open a can of worms tax wise?

[scrumpyjack]

A bare trust is as if the person having the beneficial ownership owned the asset outright and trust tax law does not apply.

[Hariseldon58]

Shares held in an account in one name, may be jointly owned by a couple. If you record this in your records I very doubt if any one will ever query this.

Get divorced and tell the judge because the shares are in an account in your sole name, they must be yours, it doesn’t work like that.....

[hiriskpaul]

I am no expert on the legal aspects of this, but I agree with Hariseldon and what you are proposing seems perfectly legitimate. Transferring before disposal is certainly more transparent, and that transparency might be worth it if either of you are investigated by HMRC, but I don't think you are doing anything wrong. The only rule I can think of that you might be in breach of is that iWeb's terms and conditions probably say that account holdings must be the property of the beneficial owner, but how would they ever find out?

The legal board might be a better home for this thread.