ADVANCED TAX Essay Example | Topics and Well Written Essays - 1500 words

ADVANCED TAX - Essay Example One of the strategies the couple can use to reduce the tax amount of the capital gain expected is to time carefully the disposal of the shares to fall into diverse tax years and take advantage of annual exemptions in each year (King & Carey, 2014). This strategy has the potential of reducing significantly the amount of tax that the couple will pay for the capital gain accumulated from the sale of the shares. This is because capital gains less than  £10,600 per annum are not taxed on individuals (Mclaughlin, 2013). Thus, the couple can spread the sale of the shares in seven different periods to ensure the capital gains fall in different years. This will ensure the capital gains accumulated are exempted from taxation. The capital gain that will be realized if the disposal is timed in seven different periods will be ( £68,000/ 7 =  £9,714.286). This capital gain is below  £10,600 per annum that will allow the gain to be exempted from taxation completely. Similarly, the shares can held under individual savings account (ISA) that will ensure the CGT liability is exempted from capital gains accumulated after disposal of the shares (King & Carey, 2014). Currently, the maximum value of shares that can be held under the ISA is  £11,520 for tax year 2013/14 (HMRC, 2013). Thus, the couple can hold  £11,520 of the  £12,000 share value to exempt the capital gain from these shares from capital gain tax liability. This implies that only ( £11,520/  £1.50 = 7,680) share of the 8,000 will be held under the ISA. Thus, the capital gain that will be accumulated from the extra shares held outside ISA will be as computed below. Another strategy Bob can use to reduce the tax amount liability from the disposal of the shares is transferring the shares prior to ensuing disposal to his wife Isobel. This is because share transfers between civil partners do not carry gain or loss