Can I have Bed and Breakfast with spouse?

[Allen]

In order to avail of the annual capital gains tax exemption limit can I transfer my shares in one company to my spouse and they transfer shares in another company to me. (I understand transfer between spouses is exempt from stamp duty? In any event it can be done without dealer’s fees.) Then the next year we would swap the shares back again etc. etc.. In that way we can avail of the CGT exemption every year and not incur dealers fees or stamp duty. Is my analysis correct and is it legal?

 

[Unregistered]

Your query doesn't make much sense. You each get the annual exemption of €1,270 but this cannot be carried over to the following year.

By merely transferring the shares between you and your wife you are essentially achieving nothing - unless the shares are eventually sold. If you were to sell shares and make a gain of more than €1,270 then it would make sense to transfer shares to your wife, who would take on the original base cost.

For example:
You want to sell shares in Company A. You bought them for 1,000 and you can sell them for 9,000 (ignore indexation). Without any transfer the gain would be as follows:
9,000 - 1,000 = 8,000
8,000 - 1,270 = 6,730
6,730 @ 20% = 1,346.

By transferring half of the shares to your wife:
Your CGT:
4,500 - 500 = 4,000
4,000 - 1,270 = 2,730
2,730 @ 20% = 546

Your wifes CGT is the same (i.e. 546). Your total CGT is 1,092 (which is 254 (i.e. 1,270 @20%) cheaper than the original amount of 1,346.

You are saving €254 and have no stamp duty (of 1%) on transfers between spouses. To arrange the transfer of ownership it may cost more than €254 so this is something that needs to be considered.

 

[Allen]

Thanks for that. Just for clarification where you say:

transfer shares to your wife, who would take on the original base cost.

Does this mean that she would acquire the shares at the original price I bought them at, and not at the value they were at the time I gave them to her? If this is the case then my tax avoidance scheme will not work. Can I not sell them to her at market value???

 

[ClubMan]

If you transfer them to her then she inherits the original acquisition price and there are no stamp duty or broker costs. If she buys them then they will be repriced at the new market value but there will presumably be stamp duty and broker costs involved which will mitigate any potential advantages of this. In fact I'm not sure that a broker can necessarily match you and your wife as seller and buyer as some sort of "closed" transaction without actually going to the market. Even if it is it seems like an awful lot of hassle for what seems like a small enough benefit?