As a practising accountant and IFA, there are two expressions which make my heart sink: “I am going self-employed” (meaning that it is a disguised employment) and: “I am going to put it in the wife’s name” (meaning that it is a sham gift).
I am sorry to see that Sarah Anderson, solicitor in tax and pensions at Bond Pearce, in her article (Money Marketing February 8) careless in using the latter when advising upon tax-efficient investment among spouses.
It is perfectly possible for one spouse to gift sums to another, thereby enabling the receiving spouse to take advantage of Isa allowances, and indeed of income tax and capital gains reliefs, lower-rate and basic-rate tax bands and so on. But what is not permissible is to “put it in his or her name” which has an entirely different sense: “I am not really giving it, I am only putting it their name.”
There is a very real distinction which I have had to explain on several occasions over the years. Such a gift must not be a sham – the funds do genuinely have to be gifted one to the other, otherwise it is nothing more than a bare trust, that is, the receiving spouse is only holding the funds as nominee for the real beneficial owner – and engaging in a conspiracy to defraud the Revenue at the same time.
It is not unknown for the intending donor spouse, once confronted with the reality of the gift, to prefer to pay the tax.
When giving such advice, all IFAs should take particular care to choose their words carefully in case they are misunderstood.