Capital gains on sale of gifted shares
Discussion
Good Morning
I am in the process of completing my tax return and have the following question:
I was gifted some shares in a family owned Ltd company approx. 10 years ago.
This company was voluntarily wound up by its members and I was paid for my portion of shares (approx. 60k).
In calculating the capital gain what value do I put to the price of the shares when I first obtained them?
The shares had a nominal value of £1 per share, so I was going to use this.
However another family member states that the value of the shares when originally transferred to me should be the value of the company divided by the total number of shares (value of company /total no of shares x no of shares gifted to me).
Before I contact my accountant, what is your idea of the correct cost of shares at acquisition?
Thanks
I am in the process of completing my tax return and have the following question:
I was gifted some shares in a family owned Ltd company approx. 10 years ago.
This company was voluntarily wound up by its members and I was paid for my portion of shares (approx. 60k).
In calculating the capital gain what value do I put to the price of the shares when I first obtained them?
The shares had a nominal value of £1 per share, so I was going to use this.
However another family member states that the value of the shares when originally transferred to me should be the value of the company divided by the total number of shares (value of company /total no of shares x no of shares gifted to me).
Before I contact my accountant, what is your idea of the correct cost of shares at acquisition?
Thanks
It depends!
Normally, you would have received the shares at their market value at the date of the gift. Whoever gifted the shares to you would have made a disposal at market value for CGT purposes and may have had a taxable gain.
However, it is entirely possible that you entered into a holdover relief election - this would have prevented the donor from having a taxable gain on the gift and you would have taken over their base cost in the shares (probably nominal value). Essentially, you pick up their gain when you sell the shares. The holdover relief election would have been a joint election signed by both yourself and the donor of the shares.
Normally, you would have received the shares at their market value at the date of the gift. Whoever gifted the shares to you would have made a disposal at market value for CGT purposes and may have had a taxable gain.
However, it is entirely possible that you entered into a holdover relief election - this would have prevented the donor from having a taxable gain on the gift and you would have taken over their base cost in the shares (probably nominal value). Essentially, you pick up their gain when you sell the shares. The holdover relief election would have been a joint election signed by both yourself and the donor of the shares.
Holdover relief was cut back many years ago and can now only be claimed for:
• gifts of business assets
• gifts of unlisted shares in trading companies etc.
• gifts of agricultural land
• gifts which are chargeable transfers for Inheritance Tax purposes
• certain types of gifts which are specifically exempted from Inheritance Tax.
More information on this link,
https://www.gov.uk/government/uploads/system/uploa...
• gifts of business assets
• gifts of unlisted shares in trading companies etc.
• gifts of agricultural land
• gifts which are chargeable transfers for Inheritance Tax purposes
• certain types of gifts which are specifically exempted from Inheritance Tax.
More information on this link,
https://www.gov.uk/government/uploads/system/uploa...
Gassing Station | Finance | Top of Page | What's New | My Stuff