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Where Taxpayers and Advisers Meet

Iht or CGT on gifted property

Tingly
Posts:34
Joined:Fri Mar 17, 2017 12:12 am
Iht or CGT on gifted property

Postby Tingly » Fri Mar 17, 2017 12:29 am

Good Evening
I am desperate for some advice if anyone can help
Have spoken to an accountant but he seems unclear ,and he has to go somewhere else for advice, and i need help now really

My mum and dad gifted me their house in about 1984 as my dad was ill and my mumwas worried that if she pre deceased him my siblings would put him in a home and then chuck me out

Anyway , i took over their bills and their care and evrything really and hopefuly gave them a worry free life

My dad dies in 1989
I moved out the house in 1992 as I got married but continued to look after my mum until she passed away in 2014

I would have liked to have kept the house to move back into one day as i was born there, however i have been renting it out and really hate doing that
So i was just wondering, as it was a gift with reservation (i think!) but because its now my second home, if I sold it would it be liable for iht,cgt or something else entirely different?
And if it was iht , as Mums estate was less than £250k would i pay tax on it?
And if its cgt , how do i find out what itwould have been worth back then- i have spoken to the inland revenue and they cant help me

Would be really grateful for any help on this - its making me ill worrying about it

Thanks

AnthonyR
Posts:322
Joined:Wed Feb 08, 2017 2:33 pm

Re: Iht or CGT on gifted property

Postby AnthonyR » Sun Mar 19, 2017 6:35 pm

You won't pay IHT on it as the estate was under the nil rate band (it is of course part of your estate so subject to IHT when you die). The question is going to CGT on a sale.

You received it at market value when your parents transferred it to you in 1984. As you've identified, the question of what that market value may be is a little difficult to ascertain going back 33 years. There was, however, considerable valuation information required as a result in big changes to CGT in 1982 and there is some historical data here which may provide you with a good starting point:

http://webarchive.nationalarchives.gov. ... ssion.html

Because the property was your main residence, you will be able to claim an exemption from CGT from 1984-1992, plus the last 18 months of ownership. plus you would benefit from lettings relief, which could reduce the gain by a further £40,000. Add in your annual exemption of £11,300.

Very roughly, assuming a £10k base cost from 1984 and £250,000 value, you have a gain of £240,000. You have 9.5/33 years exempt under PPR which reduces it by ~£69,000, lettings relief of £40,000 and an annual exemption of £11,000. This means your taxable gain is ~£120,000 subject to tax at 18/28%. So based on this the worst case scenario will be about £33,600 on a £250,000 sale.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

Tingly
Posts:34
Joined:Fri Mar 17, 2017 12:12 am

Re: Iht or CGT on gifted property

Postby Tingly » Sun Mar 26, 2017 8:07 pm

Thankyou very much for this detailed reply- much appreciated

Tingly
Posts:34
Joined:Fri Mar 17, 2017 12:12 am

Re: Iht or CGT on gifted property

Postby Tingly » Sun Mar 26, 2017 10:25 pm

Ps re lettings relief
I got my years ownership slightly wrong i've had it since 87
Therefore held house for 30 years let it for 3
So am i right in thinking the letting release will be 3/30 times the gain? So 24k relief?
Or is it a flat 40
Thanks

AnthonyR
Posts:322
Joined:Wed Feb 08, 2017 2:33 pm

Re: Iht or CGT on gifted property

Postby AnthonyR » Mon Apr 03, 2017 7:56 pm

Short answer - Yes £24k.

Long answer:

Lettings relief is the lesser of:
  • £40,000
    The gain in the PPR period
    The gain in the lettings period
It's not pro-rated, but just limited to whichever of the above is lowest.

Without knowing the exact details it's impossible to give you an answer, but looking at the figures, as you say the lettings period is 3/30 years the gain in the lettings period is approx £24k, so this would be the lower figure.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

Tingly
Posts:34
Joined:Fri Mar 17, 2017 12:12 am

Re: Iht or CGT on gifted property

Postby Tingly » Thu Apr 13, 2017 6:34 pm

Thanks AnthonyR


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