As rumours of CGT increases in the upcoming Budget continue, one tax expert advised now was the perfect time to make a gift into trust and "crystallise the current low tax rates".
Chris Etherington, partner at RSM, said: "While the focus may be on the pile of presents under the tree on Christmas Day, it could be wise for those sitting on large capital gains to consider making further gifts this holiday season.
"A gift into trust is often undertaken when someone wants to make a gift for the benefit of family members whilst retaining control of the assets gifted during their lifetime."
Mr Etherington said ordinarily when an asset was gifted it represented a disposal for CGT purposes.
He added: "Even though it is a gift and no consideration is given for it, HMRC typically treats this as a disposal for tax purposes and calculates CGT based on the asset’s market value at the date of the gift.
"As such, if an asset is gifted prior to the Budget, it will likely crystallise a CGT liability at the current CGT rates."
Recent industry speculation has suggested the tax could find itself the target of a chancellor scrambling to fill a multi-billion pound hole in the public purse following the coronavirus pandemic.
Earlier this month a 136-page review from the OTS called on the government to overhaul the current CGT system, advising its rates be more aligned with income tax.
Chancellor Rishi Sunak commissioned the review back in July, asking the OTS to consider the overall scope of the tax and the rates that apply, as well as the reliefs, exemptions and allowances.
The report found evidence of “distorted behaviour” in the current CGT structure that was often counterintuitive with “odd incentives”.
Although Mr Sunak did not lay out tax reforms in his November spending review, the OTS report has left many specialists expecting big reforms to CGT, including a seemingly inevitable increase in tax rates next year.
Mr Etherington said: "The reason a gift to trust may be the right strategy is that it allows the donor to potentially hedge their bets.
"When an asset gifted into trust triggers a CGT liability, an election can be entered into, known as a ‘holdover election’, that allows for CGT to be deferred until an eventual disposal of the asset.
"This election is often made after the gift and submitted alongside the donor’s tax return disclosing the gift and an individual could therefore wait until after the Budget to see whether CGT increases before deciding whether to enter into a holdover election.
"If CGT does increase, they might prefer for the gift to be taxable at the current CGT rates. Alternatively, if CGT rates are not substantially altered, they could enter into a ‘holdover election’ to defer any CGT liability."
But Mr Etherington said there were "important health warnings" when making gifts into trust, such as inheritance tax costs, and urged seeking professional advice.
rachel.mortimer@ft.com
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