Tax free gifts to spouse or charity

Topic: Tax free gifts to spouse or charity

As our readers are most likely aware there is usually no Capital Gains Tax (CGT) due on the transfer of assets between husbands and wives and civil partners. However, there is still a deemed disposal that has taken place for CGT purposes effectively at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold, the gain or loss will be calculated using the date and cost when the asset was first owned by the transferring spouse or civil partner.

There are a few exceptions that couples should be aware when the CGT relief does not apply. This mainly relates to the use of goods which are sold on by the transferee’s business and for couples that were separated and not living together for the entire tax year when the assets were transferred. Spouses or civil partners that lived together at any point in the tax year when the assets were transferred can still benefit from these rules. If a transfer did not qualify then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any CGT that may be payable.

There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than you paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid you rather than the market value of the asset. We would recommend that evidence is held of any transfers in case of any future queries by HMRC.

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