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bigduckontax
bigduckontax, Accountant
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Capital Gains Tax Question: My mother purchased a cello for

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Capital Gains Tax Question:
My mother purchased a cello for about 3,000 GBP in 1971. The estimated value in 1982 was 30,000 GBP. It is currently insured for 150,000 GBP (replacement cost) although the sale cost would probably be 130,000 GBP.
If she sells the instrument now, the CGT liability is clear based on the new rates from 1st April 2016.
1) My first question is whether it is possible and legal for her to transfer partial ownership or the instrument at a rate of 11,100 GBP per year; e.g. Transfer 8.54% ownership (based on 130,000 value) in year 1.
2) If yes, my follow up question is whether it is possible and legal for the transfer to be to her son.
3) Or, is it legal and possible for her to transfer ownership to a company which she would set up and which would gradually increase in it's partial ownership of the instrument?
4) Or, is there any other legal means by with the CGT could be reduced? We can assume a sale of the instrument is not required for the next 10-15 years.
Many Thanks,
Christian
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello Christian, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Always bear in mind Benjamin Franklin's dictum that in life there are but two certainties, death and taxes. Whichever way you turn you are caught by his observation. She could make the transfer you suggest within the Annual Exempt Amount (AEA), currently 11.1K, providing she has no capital gains elsewhere. Transfer to her son is perfectly feasible. If she transfers to a limited company then Incorporation Relief would apply, but this merely postpones Capital Gains Tax (CGT) until the company is ultimately disposed of. Companies are not subject to CGT all such gains are part of the trading of the company and liable to Corporation Tax at 20% on any surplus. If she disposes of the instrument in her will on her decease then there is no CGT as all assets are aggregated and liable to Inheritance tax (IHT) which is at 40% flat rate on assets over 325K. The 325K is inflated by any inter spousal or charitable bequests. I do hope that I have given you some food for thought.
Customer: replied 1 year ago.
Thank you. It seem that the company route is not suitable and gradual partial transfer of ownership would be better. I have a couple of follow up questions regarding this.
1) Firstly, would we require a solicitor to draw up a split ownership contract and gift certificate for the partial transfer of 11,100 value? Or is this something that we could do ourselves?
2) Secondly could we legally back date the first transfer of 11,100 value to before March 31st to take advantage of last years allowance and declare this on the tax return which will be submitted later?
Thank you for your help.
Christian
Expert:  bigduckontax replied 1 year ago.
1. I am of the opinion that that is an excellent idea with such a valuable instrument. 2. I am pretty sure that that will work. Remember the AEA is not cumulative. Please be so kind as to rate me before you leave the Just Answer site, Christian.
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.