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Where Taxpayers and Advisers Meet
The Lover's Good Tax Guide
01/02/2001, by Mark McLaughlin CTA (Fellow) ATT TEP, Tax Articles - General
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Tolley's Practical Tax by Mark McLaughlin ATII TEP

Tax planning for Valentines Day! Ten tax tips for for young (and old) lovers!It's Valentines Day - a time for couples to show each other how much they care. And if it can be done in a tax-efficient manner, then so much the better! Here, Tolley's Practical Tax offers its more romantic readers the top ten 'tax tips for a twosome'.

(1) A romantic dinner for two

Remember that this is supposed to be pleasure, not business, so don't try to claim the cost of your dinner or hotel stay as a business expense!

On the other hand, staff entertaining can be claimed, so if your loved one is your only employee, why not have a Valentine's Day party? Bear in mind the £75 per head limit for benefit-in-kind purposes, to avoid any unexpected tax bills.
(Extra Statutory Concession A70)

(2) Tax relief for your Valentines Day gift?

Looking for that special gift idea? Not excited by flowers or chocolates? Spoil your loved one with a gift of something (other than food, drink, tobacco or a gift voucher) bearing a conspicuous advertisement for your business.

A tax deduction may be claimed, but don't get too carried away - the cost of the gift must be no more than £10.
(TA 1988, s 577(8))

(3) What's mine is yours

Consider transferring assets to your spouse. Gifts between spouses living together are normally made a 'no gain, no loss' basis for capital gains tax purposes, and are completely exempt from inheritance tax between United Kingdom domiciled spouses. Such gifts can utilise unused capital gains tax losses and annual exemptions, and equalise estates for inheritance tax purposes to use the nil rate bands of both spouses.

Outright gifts of income producing assets can also take advantage of income tax allowances and rates, but don't get caught by the 'settlement' provisions.
(TCGA 1992, s 58(1), IHTA 1984, s 18(1), TA 1988, s 660A)

(4) Be generous - but don't get carried away!

Before you get too misty-eyed and make any inter-spouse transfers of business assets, consider the implications of capital gains tax retirement relief and taper relief.

Would your gift be a business asset in the hands of your loved one, and would the holding periods of both spouses be taken into account on a subsequent disposal?
(TCGA 1992, Sch A1 para 5, Sch 6 para 16)

(5) Planning a rosy future together

Consider giving a romantic stakeholder pension to your partner. Even if your beloved has no earnings (or is earning less than £30,000 a year) it may be possible to contribute up to £3,600 per annum into a stakeholder pension.

And don't forget a stakeholder pension for the kids! Why not fund some of the contributions out of any tax saving from the Children's Tax Credit, from 6 April 2001?

(6) Keep it in the family

Why not employ your loved one?

Make sure the salary is commercially justifiable, recorded in the books and records and physically paid.

Beware the national minimum wage rules (except for spouses working in the family business and sharing the matrimonial home), especially if you don't end up walking hand in hand into the sunset.

(7) Wedding bells

Getting married? Does your beloved have wealthy parents?

What about dropping a subtle hint about the £5,000 inheritance tax exemption for gifts in consideration of marriage by each parent?
(IHTA 1984, s 21)

(8) Diamonds are forever

Are you still waiting to receive that diamond ring? Remember that there is no capital gains tax charge on the disposal of certain 'wasting' chattels, i.e. an asset with a predictable useful life of 50 years or less. As 'a diamond is forever' trying to classify it as a wasting asset is likely to be problematic. However, if its value is less than £6,000 the gift will in any event be exempt from capital gains tax.
(TCGA 1992, ss 44, 262(1))

(9) Share and share alike

Wishing to make an extravagant gesture? Why not gift your spouse between £500 and £150,000?

They could use the money to invest in the shares of an enterprise investment scheme company, and potentially obtain income tax relief on 20% of the investment. Husband and wife may each subscribe up to £150,000 and claim the relief. Alternatively, a transfer of enterprise investment scheme shares to your spouse should not result in any withdrawal of relief, if you are both living together.
(TA 1988, ss 290, 304(1))

(10) Are you lonesome tonight?

Have you been working abroad for 60 days or more? Missing your loved one?

Why not arrange for your spouse to visit you? A Schedule E deduction may be claimed for certain travelling expenses of your spouse, which are paid or reimbursed by your employer. This includes up to two outward and two return journeys in the same tax year.
(TA 1988, s 194(2))

And so...

One final thought. If the big day does not go according to plan and your Valentine's Day tax planning activities are not well received, don't worry. The inter-spouse exemption for capital gains tax purposes applies throughout the whole of the tax year of separation!

About The Author

Mark McLaughlin is a Fellow of the Chartered Institute of Taxation, a Fellow of the Association of Taxation Technicians, and a member of the Society of Trust and Estate Practitioners. From January 1998 until December 2018, Mark was a consultant in his own tax practice, Mark McLaughlin Associates, which provided tax consultancy and support services to professional firms throughout the UK.

Mark is now a consultant with The TACS Partnership,  an independent tax advisory firm that provides high quality, independent advice on all UK taxation matters.

He is a member of the Chartered Institute of Taxation’s Capital Gains Tax & Investment Income and Succession Taxes Sub-Committees.

Mark is Chief Contributor to McLaughlin’s Tax Case Review, a monthly journal published by Tax Insider.

Mark is the Editor of the Core Tax Annuals (Bloomsbury Professional), and is a co-author of the ‘Inheritance Tax’ Annuals (Bloomsbury Professional).

Mark is Editor and a co-author of ‘Tax Planning’ (Bloomsbury Professional).

He is a co-author of ‘Ray & McLaughlin’s Practical IHT Planning’ (Bloomsbury Professional) 

Mark is also co-author of ‘Incorporating and Disincorporating a Business‘ (Bloomsbury Professional).

He is Editor and co-author of ‘HMRC Investigations Handbook‘ (Bloomsbury Professional).

Mark has also written numerous articles for professional publications, including ‘Taxation’, ‘Tax Adviser’, ‘Tolley’s Practical Tax Newsletter’ and ‘Tax Journal’, which provides free information and resources on UK taxes to taxpayers and professionals, and TaxationWeb’s sister site TaxBookShop.

Mark is a Director of Tax Insider, and Editor of Tax Insider, Property Tax Insider and Business Tax Insider, which are monthly publications aimed at providing tax tips and tax saving ideas for taxpayers and professional advisers. He is also Editor of Tax Insider Professional, a monthly publication for professional practitioners.

Mark is also a tax lecturer, and has featured in online tax lectures for Tolley Seminars Online.

Mark co-founded TaxationWeb (www.taxationweb.co.uk) in 2002.

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