Implications of CGT on Rental Property gifted in Stages

[Adam Khan]

Dear Taxation Web,

I would be grateful if someone could advise on the CGT implications of the following:

Backround:

In 2002, my sister purchased a rental property - the property is now paid up and free of a mortgage. During the past 10 years she has paid tax on the rental income. She has also spent £50,000 on Capital Enhancements.

She would now like to gift the property to me (her brother) at nil consideration.

The property was purchased in 2002 for £200,000 approx. and the market value now is £370,000 approx.

Questions:

Is it possible for her to gift the property to me in 4 equal amounts (25%) over 4 tax years (or more!), therefore using 4 CGT allowances (currently £10,600) and reducing the CGT she would have to pay to transfer the property to me?

Over the 4 years the house would still be a rental property with a relevant proportion of rent going to her and myself based on ownership. We would both pay our own share of income tax on rental income.

I know from a legal perspective this is possible as property can be owned by multiple people.

But from a tax perspective would HMRC be ok with the property being gifted to me in 4 stages over 4 tax years to minimise the CGT payable?

Or would HMRC class this as a "linked transaction," between say “Connected People” or something like that and state CGT would be payable in only one tax year?

Also, Does anyone know of any others ways to minimise the CGT Payable?

Any advice would be much appreciated.
Thank You

[maths]

Gifting in stages is fine. Market value will be imputed.

Better that no agreement up front that 100% is to be sold but in 4 stages; simply each sale needs to be independent of the others.

[King_Maker]

Yes, in theory.

It will be treated as 4 part disposals which might give a different CGT liability.

I assume this is not part of any tax avoidance scheme?

[Adam Khan]

Tax Avoidance Schemes? I don't know what they are.

I'm keen on the idea of 4 part disposals, but like maths pointed out each sale needs to be independent of the others otherwise the revenue could say there was only really one disposal with deferred consideration over 4 years. I'm not too sure how things would work from a legal perspective for 4 part disposals though?

How could I make it clear each disposal is independent from the other?

Would Land Registry records need to be changed each year? Or/And would a solicitor draw up a contract each year with the relevant percentages of ownership stated on the contract?

Thanks for the replies "Maths" and "King_Maker" - all input is appreciated.

[section 44]

Section 19 TCGA 1992 might be worth a read.

Would Land Registry records need to be changed each year?

No. Presumably, the legal title may move twice (i.e. from sister to you and sister and from you and sister to you).

The gift would be in equity (e.g. a deed of gift) and this wouldn't be dealt with by the Land Registry.