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Old 10th May 2017, 20:48   #1 (permalink)
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selling a few shares, avoiding tax?

My youngest sister suffers from MS. Like many sufferers she struggled to get a proper diagnosis for many years and her career went down the pan in the meantime. Sometimes she is OK, other times her thyroid runs wild and she is unable to walk, her speech becomes slurred and she is quite incapacitated. She has been assessed by the NHS and they have basically said she is now too old to get the best treatment from them unless she coughs up some £90k to pay for it. In practice, the way the NHS treatment works is not the best for her condition/state. The best treatment costs less than half this amount and is done in Mexico.

Back to the share selling. I have a few shares that I wish to sell to help pay for my sister and her new husband (she has to provide a carer for a month while the treatment takes place) to go to Mexico. Obviously, I don't want to just give the money directly to her as the taxman will want to take a cut from her. I also want to sell the shares without incurring an excess of tax myself, anything that ends up with the taxman reduces the amount available for her treatment. I don't want to "evade tax" and I don't want to benefit from the profit on the shares, myself. How might my sister get the maximum benefit from an investment I made nearly 20 years ago?

Any thoughts, anyone?
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Old 10th May 2017, 20:58   #2 (permalink)
 
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I think your age may be pertinent here. I am no expert but I think you can give away so much per year and use carry back/forward for one year too to increase your tax free gift. I think you can also give away as much as to like to whomever - provided you don't die within 7 years when it may be taken into account in your estate if it is above Inheritance tax limits - note your estate, not the estate of the person to whom you made the gift.


maybe this site may help you;


How do I gift money without being taxed? | money.co.uk


Other than that I would strongly advise you to take professional advice - the Citizens Advice Bureau maybe?
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Old 10th May 2017, 22:31   #3 (permalink)
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Your problems are going to be Capital Gains Tax (CGT) and Inheritance Tax (IHT).
If you're going to sell a few shares to raise £45k then unless your holdings are in Berkshire Hathaway or Apple, you have a lot of unrealised gains that, once crystallised (realised) will become liable for CGT. You can usually obtain credit for your CGT allowance and the remainder will usually be taxed at a minimum of 20%. The CGT rules however are extremely complicated, much more so than income tax rules and gains that have been rolled back into portfolios over periods of time can be compounded upwards to compensate for what is effectively an income portion of the long term increase.
Inheritance tax is much easier and until Jolly Jeremy get in £45k would be well within your £325k allowance.
You really must take your problem to a good accountant, You can make appointments off the street with many of the larger ones. You should insist on written instructions or guidelines and expect to pay a minimum of £250 per hour + VAT. Your generosity is to be applauded.

Last edited by cavortingcheetah; 11th May 2017 at 08:42.
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Old 11th May 2017, 08:33   #4 (permalink)
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Getting professional advice is sound advice, but there is no certainty that capacity gains tax would be an issue.

First you say a few shares, but not how much you expect to raise.

Secondly, not all shares will have produced huge gains over the years. This year the limit is £11,300, so shares that cost X when bought would be free of capital gains tax if sold for no more than X plus £11,300. Then there was also taper relief which is where professional advice comes in.

However how you used the dividends arising could complicate the calculation. If you reinvested the dividends for instance.

Finally, if the shares were held within an ISA then no tax is payable anyway.

I am not an expert but an enthusiastic amateur. If you send me a private message with details I can give you a reasonably good opinion.
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Old 11th May 2017, 08:42   #5 (permalink)
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I think you'll find that CGT becomes payable in the tax year in which a gain was realised. The annual CGT exemption, which varies annually over the passage of years, may not be carried forward. You use it or you lose it.
Taper relief was abolished from April 6, 2008. After that date, taper relief is no longer available to reduce the taxable gain however, the rate of CGT for a basic rate tax payer reduced to 18% (although not for property sales). Well, I think that's all correct but it easily might not be entirely so. It does go to show that you need to spend a short term pain fee for some decent and up to date information. Bear in mind too that it possible that there will be an emergency budget soon, no matter who wins. CGT is less likely to go down that it is to go up. If you know you have to make a plan, I'd act fast to implement it.

Last edited by cavortingcheetah; 11th May 2017 at 09:12.
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Old 11th May 2017, 10:56   #6 (permalink)
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Whilst taxes such as CGT May indeed change most tax changes do not occur in-year, although that is not set in concrete.

As I said, it all depends on the gain and how much you want and if in IS A or not.

Just throwing some numbers up. The FTSE has gained 46% in the last 20 years. £25,000 invested then might be worth £36,500 now. Your figures might be more or less than this. Also, suppose you sold £5,000 worth of Universal Widgets that cost £6,000 to buy then the £1,000 loss would be deducted from the gain so you could sell £37,500 with minimal tax.

I just rounded the numbers for illustration.
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Old 11th May 2017, 22:09   #7 (permalink)
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Had you invested $1,000 in Berkshire Hathaway in 1964, you'd have a shade under $12,000,000 today. I didn't.
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Old 12th May 2017, 06:05   #8 (permalink)
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Two more thoughts. Are you married? Transfer between spouses if free of tax so the spouse could then sell using her allowance.

Then, as you mentioned inheritance tax this suggests you anticipate tax should you die within 7 years having given money to your sister. Why give her the money which might be subject to tax? Consider paying her medical bills instead? For that you would definitely need advice.
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Old 12th May 2017, 09:38   #9 (permalink)
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Transfer of specie between spouses is a little more complex than handing over a £5 note.
Here's a little snapshot that perhaps puts it into perspective.

In the past it was possible to use up some of your CGT allowance by selling shares on which you had a gain, and then buying back the same shares the next day; this was known as 'bed and breakfasting'. However, investors are no longer allowed to buy back the same shares within 30 days if they intend to crystallise a capital gain. Spouses or civil partners are permitted to buy back the shares sold by their spouse or civil partner immediately, so the gain is realised CGT free while enabling the family to retain the assets.

In terms of inheritance tax, if you've shelled out £45k in medical bills for a third party and then you pop off within 7 tax years, HMRC will certainly try to add that gift into your estate for IHT purposes. There is taper relief available on IHT on gifts but note that taper relief, expressed as a percentage, relates to the tax due, not to an amount of gift reduction, so it's not that generous.

The OP has been remarkably silent. He has probably done what he should have done and taken professional advice relevant to his circumstance and that of his sister.

All this will change of course from soon after June 8th. Britain has the most punitive IHT in the world and that's now, before Jolly Jeremy and his Momentous Communists, accompanied by the Green Slime and the Lascivious Liars, forms his coalition of absolute Albionesque destruction.
Shortly after that the NHS will become defunct because all the doctors, many of whom earn in excess of £80,000, will have left the country for Australia. JJ really hasn't thought it through.

Last edited by cavortingcheetah; 12th May 2017 at 13:35.
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Old 12th May 2017, 14:44   #10 (permalink)
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When I transfsrry my shares to my wife for tax purposes I don't think they were sold but directly tranbsferred. I sent the registrar the certificate and forn and new shares were issued.
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Old 12th May 2017, 15:41   #11 (permalink)
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I'm still here, and keeping an eye on your helpful suggestions. Before I opened on here I had checked my shares and was very pleased to find that the some shares I bought 15 or 16 years ago at £1 are now on and around £20. For many years they were up and down, going down to less than 30 pence one time I looked. I had all but written them off and stopped checking them regularly but in the last year or two I see they have come good. I understand that I am allowed to make up to £11,300 after selling fees this year, without incurring any tax liability. Coincidentally, this is about the value of the shares today.

My partner has a similar number of the same shares and she is willing to do the same. The suggestion of paying the medical bills directly rather than transferring cash to my sister sounds like a sensible option. Just need to check the legality of this.

My mother has also run her thoughts about my inheritance (and my other siblings inheritances) past me and I am in favour of that going to help pay for the youngest ones the treatment. I don't know the amount involved here but every little counts. I can't answer for the other two.

Thanks for all your input. I will be taking proper advice before doing anything.

Rans6...
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Old 12th May 2017, 17:00   #12 (permalink)
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Andrew, from what you just said, spouse transfer is not relevant. Also it looks as if inheritance tax is not an issue so you paying the bills is not necessary.

If your share value is only £11,300 I don't think CGT is an issue either.

Where inheritance tax and CGT may be more relevant is your mother's inheritance but that is a different ball game.
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Old 12th May 2017, 17:14   #13 (permalink)
 
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Going off on a complete tangent here - given that you say 'every little counts' would you consider setting up some sort of donation site to help with your family's predicament? I'm thinking something along the lines of the 'Anna Irwin' funding site as currently being pointed to on the Military Aviation forum? Gofundme? Just Giving? Just a random thought for you to consider.
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Old 12th May 2017, 17:44   #14 (permalink)
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I think my sister might get collared for tax if we all start putting "un-earned income" into her account. I don't think the "let down by the NHS" card would carry any sway with HMRC to reduce the tax there. I also think that the limits on cash presents are about £3,000 pa.

Rans6
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Old 12th May 2017, 18:04   #15 (permalink)
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Quote:
Originally Posted by yellowtriumph View Post
Going off on a complete tangent here - given that you say 'every little counts' would you consider setting up some sort of donation site to help with your family's predicament? I'm thinking something along the lines of the 'Anna Irwin' funding site as currently being pointed to on the Military Aviation forum? Gofundme? Just Giving? Just a random thought for you to consider.
Just out of interest, (thinking in print):-
If there are possible tax liabilities with gifts from person to person, what might be the liability if a substantial sum(say £10,000) was donated to a 'Just Giving' appeal for the benefit of a family member?
Would the same (IHT) liability apply if the donor dies within the seven years if the recipient was an 'unknown' unrelated person?
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Old 12th May 2017, 18:52   #16 (permalink)
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G-CPTN, also thinking via keyboard, it the donation was to a registered charity, most probably not. If to a family member there might be trust rules that could be exploited.
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Old 12th May 2017, 22:42   #17 (permalink)
 
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Why are you doing it all in one year ?

Use up all the CGT allowances in this tax year by selling what is required to maximise the CGT allowance.

Borrow the difference if at all possible and then when next Tax year starts flog off the rest of the shares for both of you to use next years tax allowance.

Unless Mexican clinic requires 100% up front then should get you reaonably close to what you want to spend.
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Old 13th May 2017, 00:16   #18 (permalink)
 
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A loan that you know you can pay off over subsequent years with tax-efficient share sales may also work out cheaper than taking a tax hit.

I don't know if you can avoid some scrutiny by paying the money direct to the medical establishment involved, so the money is never in the possession of your sister.
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Old 13th May 2017, 14:11   #19 (permalink)
 
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Do what casinos were designed for.

Walk into a casino with your sister with 45,000 in your pocket and 5 in hers.
Get her to buy you a coffee.
Walk out of a casino with 45,000 in her pocket and 0 in yours.
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Old 13th May 2017, 14:21   #20 (permalink)
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cattletruck, devious, that is money laundering
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