Tax on sale of Shares

[hoopman]

Hi I wonder if anyone could give me an answer to the following.
My wife and I have 330 Irish life and permanent shares since they went on the stock market over 10 years ago and all account holders were given them free. ( although the shares are in my name as they would only be issued to one name only)
We have been lucky that we have not had to cash them in and they are currently worth around €20 each.
We have 3 children aged 17, 15 and 8 and thought it might be a nice idea to hold on to them (the shares that is) and give each of the kids 100 shares each for there 21st.
If we do that would the children have to pay some type of inheritence or gift tax or the like or
if we sell them and then give them the money do we have to pay tax on the sale of the shares.
thanks

 

[Nige]

Well, as a child can receive almost half a million in gifts/inheritances their parents without paying Capital Acquisitions Tax, it is unlikely your children would be subject to tax on 100 shares.

However, regardless of whether you gift the shares directly to them or sell the shares and give your children the money, you will be subject to capital gains tax at 20%. The original cost of the shares for tax purposes is probably mentioned in some of the documentation you received from the company over the years.

To maximise the annual CGT exemption (first 1,270 of gains per annum for each person are tax free) you should transfer half of the shares into your wife's name.

 

[hoopman]

Thanks Nige,
The shares cost us nothing, as all qualifing members of Irish permanent were awarded them.
So I am I right in saying that if we sold 100 of them now and got €2,000, then we would have to pay 20% tax on €630 of that. But if we trasfer half the shares to my wife, then if and when the time comes we could each sell 50 shares and receive €1270 each before having to pay tax.
And on the other hand if we just transfered 100 shares to each of our children on their 21st, then they would have to pay tax on anything over €1270 if they sold them.
Nothing free in this world is there?

 

[Nige]

Although the shares cost you nothing, I think there might have been a "deemed" cost for tax purposes. Maybe another shareholder could advise here?

But presuming that, for tax purposes the cost is NIL, then you are right in saying that if you sold 100 for €2,000 you would pay 20% tax on €630 (presuming of course you'd no other capital gains that year).

A transfer to your wife would not be subject to tax and a later disposal would mean that you both could get the first €1,270 of a gain tax free.

If you transfer the shares to your children, you are treated as having sold them to them at market value. So, if 100 shares are worth €2,000 it is as if made a gain for that amount and tax (if any) is payable accordingly.

Your child will then be deemed to have purchased them for €2,000 and so will only make a capital gain if he/she sells the shares for a greater amount (or gifts them to someone other than a spouse when the market value has increased).