Capital Gains and Inheritance Tax

[jeromeduke]

Hello, if someone could shed any light on the acceptability of the below, I would be very grateful.

My parents have a field that they bought for £10K and is now worth £50K. Their estate is worth more than the £650K limit for inheritance tax purposes, they do not currently use their capital gains tax allowance, there are 4 children and my parents are in good health.

Would the following be allowable:
- It's currently in my fathers name, so first he would transfer 50% to my mother.
- This tax year, my father gifts 25% to child 1. My mother gifts 25% to child 2.
- At the point of gifting, CGT is due - for each parent it would be due on (50-10)*25% = £10K which falls within their annual CGT exempt limit, so no CGT to pay.
- No Stamp Duty as its less than £125K
- In the next tax year, they each gift the other 25% to children 3 and 4.
- After surviving 7 years, the field would not fall within their estate, so IHT would not be due on it. All income from the field would go direct to the children once gifted, so there would be no beficial interest retained by my parents.

Is the above acceptable / possible ? If so, is it a case of getting a solicitor to draw up the appropriate documents.

Thanks in advance for any help.

[pqtaxation]

Is the above acceptable/possible ? If so, is it a case of getting a solicitor to draw up the appropriate documents.

Yes

[mullet]

And the key here is to have appropriate supporting documentation. In strictness the capital gains computation is not quite as you set out, since there is a statutory part disposal formula which requires the value of the part remaining to be ascertained. On which subject your parents need to get a valuation of the parts to be gifted anyway, so it would not be much more hassle/expense to have the remaining part valued. And take care to obtain a valuation for CGT purposes from a suitably qualified professional. Which will cost maybe a few hundred pounds. NOT a "valuation to market" from a local estate agent. Which is usually free and may be quite different from the value for CGT purposes.