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CAPITAL GAINS TAX PLANNING – When is a sale final for Capital Gains Tax?

A recent case has confirmed an earlier ruling that although a contract for sale of property has been signed, it doesn’t stop the original owner transferring the property to someone else in the meantime. Does it open the door for last-minute tax planning?

For CGT purposes an asset is disposed or acquired when the contract is signed, not when the asset is actually transferred or money exchanged, i.e. completion. Over the years many people have been caught out by this rule.

However, things can get interesting when there’s a gap between signing a contract and its completion. In the recent case of PJ Underwood v HMRC the judge referred to an earlier House of Lords decision, Jerome v Kelly (JK), in confirming that a seller can make a transaction that has Capital Gains Tax consequences in this interim period.

The Taxman insists that to be effective for CGT, transfers between spouses must actually take place and be evidenced by documents. This rule can be met by a simple transfer agreement between spouses.

In summary, you can transfer an asset even after you’ve agreed to sell it to someone else. Use this tactic to defer or reduce CGT by transferring all or part of an asset, already subject to a sale, to your spouse. A corresponding part of the gain will then be theirs.  Finally; just check there’s no Stamp Duty payable in the transfer.

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