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Where Taxpayers and Advisers Meet

CGT calc on property acquired through gift, inheritance & buy-out

Rivergirl
Posts:4
Joined:Sun Oct 30, 2016 9:39 pm
CGT calc on property acquired through gift, inheritance & buy-out

Postby Rivergirl » Sat Dec 03, 2016 11:33 pm

Hello, I would really appreciate some guidance.

In 1995 my father gifted my sister and me 24% each of a property. In 2010 he died, leaving my sister 54% of the property and me 46%. In 2013 I paid my sister two-thirds (ish) of her ownership and the house is now in my sole name.

The probate value of the property in 2010 was £365k. I took out a mortgage of £249k, paid £127k to my sister and spent the remaining £122k on renovating the property. It's now worth SITRO £600k. I've been running it as a FHL for three years but I may need to sell in the next year. I still owe my sister £70.1k.

I am a little confused by having acquired the property through gift, inheritance and buy-out, and then renovated it. Could anyone tell me how to calculate what capital gains tax I will need to pay if I sell the property?
Is there any value in moving into the property for, say, a year before selling, to reduce capital gains tax by making the property my primary residence?

Thank you in advance.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT calc on property acquired through gift, inheritance & buy-out

Postby maths » Sun Dec 04, 2016 3:18 pm

Your base cost for CGT purposes is the aggregate value of the values of the interests you acquired at their respective dates plus so-called enhancement expenditure (eg certain expenditure incurred doing up the property).

Certain reliefs may be available on sale (eg roll-over relief).

If you move into the property and it's your only residence and it can be shown to be your only residence then on sale some CGT relief will be available.

Rivergirl
Posts:4
Joined:Sun Oct 30, 2016 9:39 pm

Re: CGT calc on property acquired through gift, inheritance & buy-out

Postby Rivergirl » Sun Dec 04, 2016 6:11 pm

Maths, thank you for replying.

Might the calculation, then, look something like this?:

£600k Selling price
Less:
£88 gifted
£80k inherited
£197k purchased
£140k renovation
£11k CGT exempt

= £83k CGT base @ 28% higher rate CGT
= £23k CGT to pay?

Is it that simple? Or is the date of each acquisition of interest factored into the calculation somehow?

Many thanks

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT calc on property acquired through gift, inheritance & buy-out

Postby maths » Sun Dec 04, 2016 8:12 pm

Not sure about your figures but the concept is correct ie add together the market values of your acquisitions at date of gift; date of death; acquisition from sister; capital expenditure on renovation.

Then deduct annual exempt amount £11,100.

Gain then subject to 18/28% depending upon your own income tax position.

Rivergirl
Posts:4
Joined:Sun Oct 30, 2016 9:39 pm

Re: CGT calc on property acquired through gift, inheritance & buy-out

Postby Rivergirl » Sun Dec 04, 2016 8:16 pm

Lovely, thanks Maths. Much appreciated!

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT calc on property acquired through gift, inheritance & buy-out

Postby maths » Sun Dec 04, 2016 8:34 pm

No problem. I didn't go into other issues (eg roll over relief) as I assumed you, basically, want the cash.

If you're married you could however transfer a % to spouse which would mitigate overall CGT a little.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT calc on property acquired through gift, inheritance & buy-out

Postby maths » Sun Dec 04, 2016 9:04 pm

Apologies; trying to do two jobs at the same time.

No legislation to hand but Entrepreneur Relief may apply (10%) ; also transfer to spouse may be a bad idea as ER requires (from memory) 1 year of ownership prior to sale.

Rivergirl
Posts:4
Joined:Sun Oct 30, 2016 9:39 pm

Re: CGT calc on property acquired through gift, inheritance & buy-out

Postby Rivergirl » Sun Dec 04, 2016 11:20 pm

Essentially I'll do what I can to optimise the situation. The FHL is no longer viable and I'm really keen that we don't get into a situation where we can't pay the mortgage. So I'm not necessarily just after the cash. We will be looking to buy a new property, do up, sell etc. I know very little about this stuff so clearly need to investigate roll over relief: I find some online sources hard to interpret. All guidance gratefully received!

Might Entrepreneur Relief apply even if there's no registered business or company? I'll have a look into both these options.

Would they be on top of the deductions we were already talking about, or in place of one or other?

Thanks for helping - particularly as you're multi-tasking. Personally I'm rubbish at it.


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