Tax & Accounting News

Keeping hold of Capital Gains

09/03/2010

Anyone with significant holdings in the stock market will be well aware that they can make a certain amount of gains each year before having to pay Capital Gains Tax (CGT).

For the 2009/10 tax year, the exemption is £10,100, but if the exemption is not used, it will be lost. This could be a problem for anyone holding shares which have risen in value, but who wants to keep hold of them in anticipation of further gains.

For example, if someone has made a gain of £8,000 on a certain shareholding in the current tax year and they hold onto them until 2010/11 when they make a further gain of £8,000 before the shares are sold, that would result in a total gain of £16,000 and CGT being charged on part of the gain.

There are several ways around this but they all have possible disadvantages. One option would be to sell and repurchase the shares each year, taking the gains each time. However, HM Revenue and Customs (HMRC) rules state that anyone selling their shares must wait 30 days to buy them back, or the CGT exemption does not apply – which raises the possibility of the shares rising in value during the 30 years and any gain being missed.

An option for married couples or civil partners would be for one to buy the shares and the other to buy them back, before gifting them to the first person after 31 days; if this is not possible, the shareholder could opt to buy shares in a different company operating in the same sector, as their shares may be likely to perform in a similar way. Anyone doing this should also bear in mind the cost of broker’s fees (from £15) and stamp duty (0.5%) on each transaction.

For more information please contact us.

 

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