How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask TonyTax Your Own Question
TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15930
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
13905389
Type Your Tax Question Here...
TonyTax is online now

Two years ago my wife gave a property worth £250,000 to a discretionary

Resolved Question:

Two years ago my wife gave a property worth £250,000 to a discretionary trust in favour of our children and grandchildren (excluding my wife and I, as settlors). We now wish to transfer a jointly owned property, of roughly the same value, to the same trust. There is unlikely to be a CGT gain, as the market value has not increased since original purchase. However:-
(1) Are there likely to be any other tax problems in transferring another asset to the same trust?
(2) If my wife transfers her half of the second property, she will presumably exceed her IHT threshhold. Therefore it is presumably best if she transfers her half to me first, as I have made no other gifts in the last seven years. However, will this still count as a chargeable IHT disposal by her?
(3) Will the transfer of her 50% to me, immediately prior to the transfer to the trust, be treated as tax avoidance?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

1There is no reason why an existing trust cannot be added to as you will see in example 3 here. You both appear to be settlors of the trust. An increase in the trusts value will affect the ten year IHT charges. There are some HMRC notes on discretionary trusts here.

2 A gift to you by your wife of her half of the property is a disposal for Capital Gains Tax purposes but as you will take her share of the original purchase price as your own, there will be no gain or loss. Gifts between spouses are normally exempt from Inheritance Tax and are not treated as potentially exempt transfers.

3 Take a look under the heading "Making Gifts" here. It is possible that HMRC could level the "Ramsey" principle at you if they saw the gift to you of your wife's share of the property to you followed by the gift of the property into the trust as a series of transactions designed to avoid Inheritance Tax. It may be that it would never be enquired into. A delay of a year or so after the transfer to you may serve to avoid a close inspection by the tax office but there are no guarantees.

A while back, tax consultants were advising spouses and civil partners wishing to put property into joint names before a disposal to save CGT to make the transfer into joint names and the sale occur in different tax years to avoid HMRC accusations of tax avoidance. However, HMRC made a statement stating that they would not seek to challenge such transactions so that may give you some comfort.

I hope this helps but let me know if you have any further questions.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 3 years ago.


Thanks - That's very helpful, I'll fully review it tonight and, if necessary, come back to you tomorrow and do the rating.


John

Expert:  TonyTax replied 3 years ago.
That's fine.

Related Tax Questions