Check the value
Tax is complicated, and sometimes it isn’t obvious what amounts you should report on your tax return. For example, if you give away a property or shares, how do you determine whether you have to pay Capital Gains Tax (CGT) tax on that gift or not?
The first step is to take account of who you have given the asset to. A gift to a charity will be exempt from tax, but where the recipient is a relative, you are generally taxed as if you had sold it at market value. A transfer to your spouse or civil partner, in the year you were living with that person, is not chargeable to CGT, but the recipient’s gain or loss on eventual disposal of the asset will reflect the couple’s combined ownership period.
Where the transfer is treated as being made at market value, you have to ascertain what that value is, often by paying for a professional valuation. HMRC will not necessarily agree with the value you have come up with.
You can ask HMRC to check your valuation by submitting a form CG34, together with supporting documents such as plans of the property, or three years of company accounts for shares. The capital gains tax compliance office within HMRC will accept or reject the valuation you suggest, but that process will take at least two months.
If your tax return is due for submission within that two-month period, you should not ask for the valuation check, as HMRC won’t provide an opinion on figures already reported on a tax return. If you do have time to get the valuation checked, don’t delay submitting your tax return if you are still waiting for a response from HMRC when the deadline comes around.
There is an election you can make to hold over any tax due when the asset given away was used for business purposes, and that may include shares held in your own company. We can help you with such holdover elections.