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“Scramble to escape capital gains tax”

27.05.2010

That's the headline on the front page of today's Times, with talk of a rush to sell assets before CGT rates go up. If any of your clients are looking to do this, in specie pension contributions to SIPPs have to be an option worth considering.

The mechanics are simple - make an in specie contribution to a SIPP and pay current CGT rates on any capital gains to date, but protect all future gains against potentially higher tax rates, and keep control of the assets into the bargain. What's more, there's the added bonus of tax relief received on the contribution. Of course it needs to be the right sort of asset - stocks and shares or commercial property but no second homes, classic cars etc. Also watch out on the limits on tax relief for contributions by high income individuals - but you know all that stuff anyway.

The important point is that making in specie contributions at the present time kills off 2 potential birds with one stone - sheltering assets from higher future rates of CGT, and making pension contributions before tax reliefs become more restrictive.

None of this is cast in stone - the Queen's Speech referred to increasing CGT to rates "closer to" income tax levels (whatever that means) and the LibDem threatened restrictions on future tax relief on pension contributions might not materialise. The timing of any changes cannot be predicted for sure either. If you do have clients who are worried about all this, though, an in specie SIPP contribution might be something they want to hear about.

In specie contributions take a little while to arrange, and the emergency Budget is on 22 June, so anyone thinking about this needs to get a move on. At Curtis Banks we have extensive experience with processing in specie contributions and will be pleased to help any of your clients take action.

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