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Sipp advantage for share transfers
Anyone who has recently acquired shares from a matured Share Incentive Plan
or Save as You Earn Share Option Scheme could give them a boost by investing
them in a Sipp as a pension contribution.
By doing so, the value of the shares receive an automatic uplift from the
taxman in the form of 20 per cent tax relief and will grow free of income and
capital gains tax within the Sipp.
If you are a higher rate taxpayer, you can claim a further 20 per cent tax
relief via your self
assessment tax return.
So £800 worth of shares paid as a pension contribution would be topped up by
the taxman to £1,000 and a further £200 can be reclaimed via your tax return, if
you are a higher rate taxpayer.
Tom McPhail of IFA firm Hargreaves Lansdown says: "If you've not got cash to
make a pension contribution, this is a great way of getting tax relief on shares
you already own."
Ian Naismith of Scottish Widows says: "Both SAYE Share Option Schemes and
Share Incentive Plans are tax efficient, but the latter are particularly so
because the 'partnership shares' in s SIP are bought out of gross earnings, but
qualify for a second slug of tax relief on being placed within a Sipp."
There are two ways in which you can place shares you already own into a
Sipp.
The first is to make an 'in specie' transfer which means that you place the
shares directly into your Sipp as a pension contribution without selling them.
Not all Sipp providers allow this, as it can be messy if the value of your
shares changes while the transaction takes place.
Most Sipp providers, therefore, offer a 'bed and Sipp' service whereby they
will sell your shares and immediately buy them back within your Sipp at roughly
the same price.
Whichever way you transfer shares into a Sipp, you will need
to pay any CGT due at the point of transfer because you are selling the shares.
If the capital gains are small, they may fall within your CGT allowance of
£10,100 and you will have no tax to pay. Sny excess gain over £10,100 will
attract CGT at a flat rate of 18 per cent.
Compare
Sipp share plans.
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