CGT Planning

Asset Transfers

Planning can be hindered by the potential for tax charges to arise when assets are moved between members of the family. Most gifts are potentially taxable as if they were disposals at market value, with a resulting exposure to CGT and IHT.

However, special rules govern the transfer of assets between spouses. In many cases for both CGT and IHT there is no tax charge, but there are some exceptions - please contact us for further advice. In addition, gifts must be outright to be effective for tax, and must not comprise a right only to income. Careful timing and advance discussion with us are essential.

It may be possible to reduce your taxable income and retain your allowances, if approached with due consideration, eg. by making pension contributions or Gift Aid donations. Contact us now for advice on minimising the impact of the top tax rates.

Marriage breakdown

Maintenance payments do not usually qualify for tax relief. The special CGT and IHT treatment for transfers between spouses applies throughout the tax year in which a separation occurs. For CGT, transfers in subsequent years are dealt with under the rules for disposals between connected persons, with the disposal treated as a sale at market value, which could result in substantial chargeable gains. For IHT, transfers remain exempt until the decree absolute.

Careful consideration as to the timing of such transfers is essential. We can provide advice and assistance in this matter.

Planning for the worst

Proper contingency planning can help to ensure that your spouse and/or children would be able to cope financially if you died or were incapacitated.

One initial step might be to take out adequate insurance cover, perhaps with life assurance written into trust for your spouse or children to ensure quick access to funds. However, it is also important to make a Will. We also strongly recommend that you and your spouse:

  • Make a living Will (also called 'advance decisions'): so that your wishes are clear with regard to medical treatment in the event that, for example, you were seriously injured following an accident
  • Execute a lasting power of attorney: so that if you become incapacitated and unable to manage your affairs, whether as a result of an accident or illness, responsibility will pass to a trusted person of your choosing.
On a practical note, make sure that you tell your spouse, your parents, and your business partners where your Will and any related documents are kept. It is your choice whether to discuss your affairs in detail, but if you are passing on responsibility for managing your affairs, it might be advisable to talk matters through with them.

Reach us and get your situation analysed:

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