Tax when transferring bare trust shares to children when 18

[Bouleversee]

I have gifted shares to my 4 grandchildren over the years (in bare trusts with parents as trustees, designated with the child's initials in each case) and 3 of them are now 18 and the parents want to transfer the shares to the ISAs which they have opened. As my brain seems to be permanently fogged these days, I am not entirely clear as to the procedure and tax implications. 1) I presume the trustees will have to sign a transfer form and send to the registrars to get the shares transferred into the child's name and then the child will have to transfer them to their dealing account on the platform holding the ISA. Am I right in thinking that this does not count as a disposal and there would be no potential tax liability at this point?
2) When the shares are transferred into the individual ISAs from the dealing account (or sold), there would presumably be a potential cgt liability, subject to personal allowance, c.g.t. allowance and losses to offset, and in one case earnings during a current placement year while at university, but would the calculation be based on the value of the holding at the date of the gift, the date of the switch from bare trust to individual holding, or the date of the bed-and-ISA or plain sale of the shares if considered not worth transferring? The way things are a.t.m. I am wondering whether it might make sense to have some of their money in the best yielding cash account with easy access or even Premium Bonds. My own portfolios have not done me any favours or been worth the effort for the past few years and as they have some of the same holdings we need to consider the recovery potential of each of theirs. Now which board could I discuss that on?

Advice on this would be much appreciated. TIA.

[scrumpyjack]

I have gifted shares to my 4 grandchildren over the years (in bare trusts with parents as trustees, designated with the child's initials in each case) and 3 of them are now 18 and the parents want to transfer the shares to the ISAs which they have opened. As my brain seems to be permanently fogged these days, I am not entirely clear as to the procedure and tax implications. 1) I presume the trustees will have to sign a transfer form and send to the registrars to get the shares transferred into the child's name and then the child will have to transfer them to their dealing account on the platform holding the ISA. Am I right in thinking that this does not count as a disposal and there would be no potential tax liability at this point?
2) When the shares are transferred into the individual ISAs from the dealing account (or sold), there would presumably be a potential cgt liability, subject to personal allowance, c.g.t. allowance and losses to offset, and in one case earnings during a current placement year while at university, but would the calculation be based on the value of the holding at the date of the gift, the date of the switch from bare trust to individual holding, or the date of the bed-and-ISA or plain sale of the shares if considered not worth transferring? The way things are a.t.m. I am wondering whether it might make sense to have some of their money in the best yielding cash account with easy access or even Premium Bonds. My own portfolios have not done me any favours or been worth the effort for the past few years and as they have some of the same holdings we need to consider the recovery potential of each of theirs. Now which board could I discuss that on?

Advice on this would be much appreciated. TIA.

You cannot 'transfer' shares to an ISA. You can only subscribe cash. Some brokers will do arrangements with reduced fees and spread so shares in your dealing account are sold and repurchased in the ISA, but it is still a disposal and purchase, not a transfer. It is a disposal for CGT purposes.

[Alaric]

It is a disposal for CGT purposes.

Which leads to the question as to what is the cost base? Is it the amount originally gifted some years earlier or the value at date of transfer.

[Lootman]

It is a disposal for CGT purposes.

Which leads to the question as to what is the cost base? Is it the amount originally gifted some years earlier or the value at date of transfer.

The value at the date of transfer. Although the transferor should have paid CGT on the profit as if it had been sold.

Not if between spouses, when it remains the original cost basis.

[Bouleversee]

I have gifted shares to my 4 grandchildren over the years (in bare trusts with parents as trustees, designated with the child's initials in each case) and 3 of them are now 18 and the parents want to transfer the shares to the ISAs which they have opened. As my brain seems to be permanently fogged these days, I am not entirely clear as to the procedure and tax implications. 1) I presume the trustees will have to sign a transfer form and send to the registrars to get the shares transferred into the child's name and then the child will have to transfer them to their dealing account on the platform holding the ISA. Am I right in thinking that this does not count as a disposal and there would be no potential tax liability at this point?
2) When the shares are transferred into the individual ISAs from the dealing account (or sold), there would presumably be a potential cgt liability, subject to personal allowance, c.g.t. allowance and losses to offset, and in one case earnings during a current placement year while at university, but would the calculation be based on the value of the holding at the date of the gift, the date of the switch from bare trust to individual holding, or the date of the bed-and-ISA or plain sale of the shares if considered not worth transferring? The way things are a.t.m. I am wondering whether it might make sense to have some of their money in the best yielding cash account with easy access or even Premium Bonds. My own portfolios have not done me any favours or been worth the effort for the past few years and as they have some of the same holdings we need to consider the recovery potential of each of theirs. Now which board could I discuss that on?

Advice on this would be much appreciated. TIA.

You cannot 'transfer' shares to an ISA. You can only subscribe cash. Some brokers will do arrangements with reduced fees and spread so shares in your dealing account are sold and repurchased in the ISA, but it is still a disposal and purchase, not a transfer. It is a disposal for CGT purposes.

Well, I did refer to bed-and-isa and say that it would potentially be subject to cgt, depending on the figures, so obviously a disposal but you haven't answered my question. Incidentally, when there is a bed-and-isa , one ends up with fewer shares as they deduct charges from the sales proceeds and buy back shares with what's left. It also assumes you have not already used the current year's ISA allowance. if you have, and there is sufficient cash in the account, you can, of course, just sell the shares and buy the same number and lose on the spread or if you are clever/lucky do the sale and purchase on different days buying as many as you wish with the cash in the account. That is, however, taking more or a risk and unless you are lucky, you will lose a bit of money on a bigger spread.

[Bouleversee]

Which leads to the question as to what is the cost base? Is it the amount originally gifted some years earlier or the value at date of transfer.

The value at the date of transfer. Although the transferor should have paid CGT on the profit as if it had been sold.

Not if between spouses, when it remains the original cost basis.

Not clear which transfer and transferor you are talking about. I shouldn't have thought the trustees would have to pay tax on something of no benefit to them. However, it will have to wait till tomorrow as I need to go to bed.

[scrumpyjack]

Which leads to the question as to what is the cost base? Is it the amount originally gifted some years earlier or the value at date of transfer.

The value at the date of transfer. Although the transferor should have paid CGT on the profit as if it had been sold.

Not if between spouses, when it remains the original cost basis.

Cost for the children is the value at the date you gifted the shares to them (and that was a disposal by you at the then market value). Any subsequent transfer (ie from you as bare trustee to them as beneficial owners) is not a disposal as they remain the beneficial owners. I'm assuming it wasn't so so long ago that you could get holdover relief on the gift. I think that stopped many decades ago in most circumstances.

[Alaric]

Any subsequent transfer (ie from you as bare trustee to them as beneficial owners) is not a disposal as they remain the beneficial owners.

Which means if they shelter it by running a Bed and ISA on the shares, that's where the gain comes in and it's from when the shares were first gifted up until the bed & ISA date.

[Bouleversee]

Thanks to both That is what I thought would be the case. The disposals were notified to HMRC in the year I gifted and, as previously mentioned, it is the parents who are the trustees, not me. I'm just checking the facts to make sure they and the grandchildren are aware of what is required disposals accordingly. Although there are 13 holdings, they are not for huge amounts, and having checked today's prices against m.v. at gifting, there won't be any cgt to pay at present values as most are showing a loss and the few gains will be within allowances. I have yet to come to grips with Pooling in the cases where there was more than one gifting of the same share and need to refresh my memory re S104 holdings but not well enough to do any more on this today and I haven't thought through what we do about the youngest child who has a JISA but may not be allowed to transfer her shares (subject to ISA capacity) into that. She probably can't even have a dealing account yet or hold certificated shares in her own name.

What a lot of work for minimal benefit. However, if the trustees get their skates on, it could be a good time to get the holdings into ISAs, where possible..