Silver lining to investment cloud
Inheritance Tax (IHT). Say the share price of your plc investment has taken a tumble recently. Not, of course, that the company is alone in that: but it does give us the chance to bring this IHT reminder. One of the features of making a gift during your lifetime to avoid IHT is that it fixes the value for IHT purposes as at the date of the transfer. Accordingly, if a shareholder gives away a holding of shares and the price subsequently recovers to its former level, that growth will escape IHT (as will the entire value if the transferor survives for the normal seven-year period).
Capital Gains Tax (CGT). If, despite the fall in the value of your investment, you are still up on what you paid for it, there could be a CGT bill on the transfer. However, in any one tax-year you have an CGT-free amount (for 2004/5 this is £8,200) so the gain on a transfer could be covered if you haven’t made any other gains.