The following are the key tax planning opportunities available in the area of capital gains tax.
The annual capital gains tax exemption for individuals is £7,900 for 2003/04 and £3,950 for most trustees. The exemption is available to both a husband and wife, so between them capital gains of up to £15,800 in this tax year can be realised without any CGT liability.
Gains under a bare trust are currently treated as having been made by the beneficiary, regardless of who the settlor is. Thus, that beneficiary's annual exemption will be available on gains made on the trust assets.
However, it should be noted that, in its recent consultative document, the Inland Revenue has identified this rule as one for possible change in the future where a parent creates a bare trust for the benefit of a minor child.
Transfers between spouses are on a no-gain, no-loss basis. Therefore, as long as any transfer is outright and unconditional, a prior transfer to a spouse could effectively double the potential use of the annual exemption.
Capital losses could also be crystallised for tax purposes if gains in excess of the annual exemption have arisen in the same tax year.
If a disposal in the near future is contemplated which will trigger a capital gain in excess of £7,900, if legally and practically possible, it may be worthwhile spreading the disposal across two tax years in April. Alternatively, if the disposal cannot be spread or is very substantial, the disposal could be delayed until after April 5, 2004. At least then the payment of capital gains tax will be delayed until January 31, 2006.
Those who have realised a capital gain recently could consider taking advantage of the deferral relief that is available on an investment in an Enterprise Investment Scheme or venture capital trust before April 6, 2004 and within the normal 12 months of disposal timeframe as explained earlier.
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