Your IndustryMay 5 2016

Guide to CGT and Trusts

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Approx.60min

    Guide to CGT and Trusts

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      CPD
      Approx.60min
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      Introduction

      By Simoney Kyriakou
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      Capital gains tax (CGT) has been a thorn in the side of tax planners for many years.

      Before 1965, if you owned land or shares or any asset which had increased in value during your ownership, you could have sold it and pocketed the difference.

      Then, in 1965, CGT was introduced, which as Sue Moore, tax faculty technical manager for the Institute of Chartered Accountants in England and Wales, summarises, “is a tax on the increase in value of a chargeable asset while it has been in your ownership”.

      Within a few years, the introduction of CGT was being challenged in UK courts.

      In Secretan v Hart (Inspector of Taxes) in 1969 the taxpayer claimed CGT was a tax on capital gains, which meant gains in true money terms.

      The taxpayer’s argument to the High Court was, therefore, the price actually paid by him should be reassessed to take into account the fall in value of the pound.

      However, the answer of the Court was simply the legislation, in particular the rules for deductions, did not make any provision of this kind.

      What the courts could not do, and what politicians were unwilling to do, was to make CGT more saver-friendly and reward those who had invested.

      And so the industry created a range of trusts and structures, some recognised and approved by HM Revenue & Customs and therefore perfectly legitimate, to help mitigate the full effect of CGT.

      This guide aims to explore what is CGT; when it is payable; how to work out how much CGT is owed; how to mitigate CGT through various reliefs; exploring CGT in relation to death; and how to set up a trust to help children.

      Contributors of content to this guide are: HM Revenue & Customs; Sue Moore, tax faculty technical manager for the Institute of Chartered Accountants in England and Wales; Joan Foster, partner for RSM UK; Gary Smith, financial planner for Tilney Bestinvest; James Badcock, partner for Collyer Bristow; Scott Gallacher, director for Rowley Turton; Clarion Wealth Planning; John Devine, investment manager for Thesis Asset Management.

      simoney.kyriakou@ft.com

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