HMRC query on CGT

[fydo]

Hi new to this so apologize if already answered elsewhere.

I started my company in Nov 2001. I had one share. On my accountants advice he asked me to issue one share to my spouse in Nov 2007 so I went to the companies website and allocated one share to my spouse.

In March 2008 we decided to close the company and the accountant distributed the capital gained between the two shareholders and he claimed 75% relief on both shares. The HMRC have picked up on this and are querying why 75% relief was claimed on my spouse since the share was held for less than one year. I left my accountant after he closed the company.

The accountant now claims that he told me to first allocate the share to me and then transfer the share to the spouse, which clearly he did not, and hence calculated the CGT for my spouse based on that. I did send him the allocation form 88(2) for him to check if I had done it right and he said I had. He should at that stage have picked up that I did not transfer the share and hence advice me to coorect it.

Can anyone please advice what I should do now and how I should respond to the HMRC?

[mullet]

Can anyone please advice what I should do now and how I should respond to the HMRC?

On the basis of the information provided it looks like you will just have to agree with HMRC. The second share was newly issued rather than transferred, and was never held by you. Therefore it was owned for less than 1 year and your wife's disposal does not qualify for taper relief.

[fydo]

Hi Msp,

Thanks for your response. I have contacted the accountant again and he says that since a resolution was passed to state that a share should be allocated to me and then transferred to my spouse, I should let the inland revenue know it was an error on my part that I did not act as per resolution.

Would the HMRC accept this?

Fydo

[emdlaw]

Hi Msp,

Thanks for your response. I have contacted the accountant again and he says that since a resolution was passed to state that a share should be allocated to me and then transferred to my spouse, I should let the inland revenue know it was an error on my part that I did not act as per resolution.

Would the HMRC accept this?

Fydo

Very very unlikely.

[mullet]

I have contacted the accountant again and he says that since a resolution was passed to state that a share should be allocated to me and then transferred to my spouse, I should let the inland revenue know it was an error on my part that I did not act as per resolution.

HMRC can only act on what actually happened, not what was intended to happen. The facts are that the share was issued to your spouse and not you, and that it was held for less than one year. You cannot rewrite history and change the outcome. A resolution which was not acted upon is very different from the actual issue of a share to an individual.

[AvocadoK]

I agree with msp.

But even if husband had in fact transferred a share to wife, she would not be able to claim the full 75% taper. The taper rules said that.
1. Wife would include husband's period of ownership of the shares in calculating her ownership period BUT
2. As to whether the shares are business assets or otherwise, you have to look at wife's position in the whole of the period. From 2001 to 2007, the asset would have been a non business asset for wife as she did not have a qualifying holding in that period; for the next 9 months they would have been a business asset. She would have ended up with a mix of business and non business taper, which would have given her somewhere between 40% and 75% taper overall.
AK

[fydo]

All,

Thanks for taking the time to respond.

We have to accept that -

1) The accoutant was incorrect in what he adviced and
2) We will now face an additional CGT tax bill plus penalties

Given that I had sent the accountant form88(2) clearly showing that I had allocated the share rather then transfer, and hence 75% relief should not have been applied, are the penalties likely to be reduced?

As a matter on interest what is the correct procedure to transfer shares to a spouse in a private limited company. I am assuming the following-

1) Pass a resolution to transfer the share
2) Fill out a stock transfer form and put 'gift' or 'nil' for the consideration £
3) File the STF in the company register
4) Issue share certificate to spouse
5) Report the share changes in the next annual return at the Companies House

Are the above steps correct?

Once again thanks all

Fydo

[Incredulum]

If your accountant advised you incorrectly then you could sue him.

However, it appears he advised you correctly, and you failed to follow his advice.

You gave him paperwork that showed that you didn't follow his advice, and he didn't look at it. Have you got a case against him? Difficult to say.

Will HMRC reduce your tax/penalties on account of this? No.

[fydo]

Incredulum just want to make it clear that he did not advice me to transfer the share first, he claims he did. He told me to go the companies website and use form 88(2) to give my spouse a share as i was not sure which form to use etc. I did as advised. Couple of montha later he requested the company information which I got for him but for some reason it did not show my spouse a shareholder - might have been because it was done after the annual retun date? So the accountant himself went to the companies website using his account to get 88(2) and sent copied to me confirming what i had done was correct.

My arguement is he should at that point told me it was not the right procedure and hence should not have claimed the 75% relief.

Regards

Fydo

[fydo]

And also he wants me to say/show in retrospect that a resolution was passed to transfer the share, infact it was never done that way as my earlier email states.

I feel he is trying to cover his wrong advice and pass the blame on to me.

Regards

Fydo