T26 - It’s Valentines Day…a time for couples to show
each other how much they care. And if it can be done in a tax-efficient
manner, then so much the better! Here are ten top tips:
1. A romantic dinner for twoRemember that this is supposed to be
pleasure, not business, so don’t try to claim the cost of your dinner or
hotel stay as a business expense!
On the other hand, staff entertaining can be claimed, so if your loved one
is your only employee, why not have a Valentine’s Day party? Bear in mind
the £150 per head limit for benefit-in-kind purposes, to avoid any
unexpected tax bills. (If you've already used this up on a lavish Christmas
do however - you've lost your chance!)
2. Tax relief for your Valentines Day gift?
Looking for that special gift idea? Not excited by flowers or chocolates?
Spoil your loved one with a gift of something (other than food, drink,
tobacco or a gift voucher) bearing a conspicuous advertisement for your
business.
A tax deduction may be claimed, but don’t get too carried away - the cost of
the gift must be no more than £10.
3. What’s mine is yours
Consider transferring assets to your spouse. Gifts between spouses living
together are normally made on a ‘no gain, no loss’ basis for capital gains
tax purposes, and are completely exempt from inheritance tax between United
Kingdom domiciled spouses. Such gifts can assist in utilising unused capital
gains tax losses and annual exemptions, and in equalising estates for
inheritance tax purposes to use the nil rate bands of both spouses.
Outright gifts of income producing assets can also take advantage of income
tax allowances and rates. However, don’t get caught by the ‘settlement’
provisions, particularly involving gifts of business interests.
4. Be generous…but don’t get carried away!
Before you get too misty-eyed and make any inter-spouse transfers of
business assets, aside from the settlements anti-avoidance rules mentioned
above consider the implications for capital gains tax taper relief purposes.
Would your gift be a business asset in the hands of your loved one, and
would the holding periods of both spouses be taken into account on a
subsequent disposal?
5. Planning a rosy future together
Consider giving a romantic stakeholder pension to your partner. Even if
your beloved has no earnings (or is earning less than £30,000 a year) it may
be possible to contribute up to £3,600 per annum into a stakeholder pension.
And don’t forget a stakeholder pension for the kids!
6. Wedding bells
Getting married? Does your beloved have wealthy parents?
What about dropping a subtle hint about the £5,000 inheritance tax exemption
for gifts in consideration of marriage by each parent?
8. Diamonds are forever
Are you still waiting to receive that diamond ring? Remember that there
is no capital gains tax charge on the disposal of certain ‘wasting’
chattels, i.e. assets with a predictable useful life of 50 years or less. As
‘a diamond is forever’ trying to classify it as a wasting asset is likely to
be problematic. However, if its value is less than £6,000 the gift will in
any event be exempt from capital gains tax.
9. Share and share alike
Wishing to make an extravagant gesture? Why not gift your spouse between
£500 and £150,000?
They could use this money to invest in the shares of an enterprise
investment scheme company, and potentially obtain income tax relief on 20%
of the investment. Husband and wife may each subscribe up to £150,000 and
claim the relief. Alternatively, a transfer of enterprise investment scheme
shares to your spouse should not result in any withdrawal of relief, if you
are both living together.
10. Are you lonesome tonight?
Have you been working abroad for 60 days or more? Missing your loved one?
Why not arrange for your spouse to visit you? A deduction from earnings may
be claimed for certain travelling expenses of your spouse, which are paid or
reimbursed by your employer. This includes up to two outward and two return
journeys in the same tax year.
Happy Valentines Day!
One final thought. If the big day does not go according to plan and your
Valentine’s Day tax planning activities are not well received, don’t worry.
The inter-spouse exemption for capital gains tax purposes applies throughout
the whole of the tax year of separation!
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