CTG and Property??

[nkdnellie@msn.com]

My husband's grandmother's house has been signed over to his father and his uncle- she is still living, but has now moved to his father's house. The house is being sold. She owned the house for years and years. What are the types of taxes that the property will be liable for upon sale? Thank you!

[taxman]

On the basis that the signing over of property represented a gift from the mother, then this would constitute a disposal, with sale proceeds = to market value at that time. unlikley to have been a gain chargeable if mother always lived in property and sold within 3 years of moving out.
when her sons sell the property then will be capital gains tax payable but the cost will be the market value at date of the above gift. therefore assuming any house price increases have been small, will be a minimal gain that could be off set by annual exemption.
may be stamp; duty for purchaser depending on property price.
also will be inheritance tax implications of the gift.
If you would like further advice please e-mail me at above.

[steve@nunn-hayward.c]

Tax Points to consider on "Transfer" from Grandmother(GM) to "sons" :-

Capital Gains Tax(CGT) - was the transfer a gift or in consideration of care/accomodation in your fathers house? There my be no CGT cost either way but this point could be crucial to my main concern that I come to later. So long as GM lived in house as main residence of less than 1/2 hectare exemption should follow. The details need to be checked.

Inheritance Tax (IHT) - the same issue is relevant here. If a gift then it is likely it will be Potentially Exempt. So long as your GM survives 7 years no IHT effect will ensue. Insurance can be purchaced if felt appropriate. If transfered for full consideration then IHT shold not be an issue.

Stamp Duty (SD) - as above if a gift, exemption is probable. If consideration then SD may be an issue.

Tax Points to consider on Sale by sons :-

CGT - cost will be market value and if no sigificant movement in price,annual exemptions of sons if unused should result in no CGT. If the price has moved (planning permission sought/expected?) then consider gifts to spouses for extra exemptions, Capital losses brought forward, or realising losses on assets currently held.

IHT - unlikely is sale is on open market.

SD - Payable by purchacer depending on price.

Other points :-

My main concern with what has been outlined is nothing to do with tax but the rules on Charging for residential Care Guidelines(CRAG).Increasingly local autorities due to fiscal pressures are succesfully pursing recipients of "gifts" using this legislation. In other words 100% of the value is at stake not just the tax at 40%. Hense my concern as to the exact status of the transaction.

As you can see from what is only a brief scim over the surface this is somthing I reccomend you take further advice on both Tax and the CGAG rules.

I would be pleased to have an initial chat to assess your families requirements. Please call if you wish to take matters further.

Regards

Steve Cook
Tax Partner, Nunn Hayward, Chartered Accountants
01753 - 888211