Limiting inhertance tax

[Pukka]

My father passed on the family home to me 4 years ago with a view to see out the 7 years period whilst he is still alive to overcome tax I may have to pay when I sell it.

It is not my primary residence and would like to sell it before the 7 years are up. I have heard that if I make this my primary residence I can sell it without paying any tax. If true how long would I need to live in it to be able to do this.

[Instinctive]

This is really a CGT question and not an IHT one.

You have actually owned the house for 4 years and during this entire period it has not been your main residence. If you make this your main residence as a matter of fact, and then sell it, last 3 years of ownership will be exempted. There may be some CGT liability in respect of the gain relating to the rest of the period of ownership.

Residence is a question of fact and quality is more important than length of occupation. There is no defined period to establish residence, although a period of at least 3 to 6 months is frequently recommended.

Ramnik
ramnikrp@hotmail.com

[Pukka]

Thank you for clarifying the query. I have been told that there was or is a roll-over relief as I want actually invest all the proceeds from the sale into another property. Does this still exist? If so how does it work.

[Lambs]

P,

Roll-over relief does still exist, after a fashion, but candidate assets are restricted, i.e. it is now termed "Replacement of BUSINESS Assets Relief."

I do not therefore see that this is open to you, in the circumstances you have outlined.

However, there is a similar relief in the form of an investment into the Enterprise Investment Scheme - or more correctly, an investment into shares which qualify as EIS shares. You might shelter your gain there, but of course you would own shares, and not a new property. However, if it is just any property that you want to invest in, and not a particular property, then there are some EIS schemes which have a substantial "bricks and mortar" element to them - I am thinking here of some pub schemes.

I should point out that EIS is generally perceived as being a more "high-risk" investment in small, volatile companies - hence the relief afforded by the government in order to encourage investment.

You should definitely speak to a suitably qualified financial adviser, if EIS appeals.

On the other hand, I's suggestion is eminently practical.

Regards,

Lambs

[Instinctive]

Hi Lamb,
How are you doing?

(1) I thought that the correct name for Rollover Relief has always been Replacement of Business assets.

(2) You keep calling me 'I'. This confuses even me. I would love you to call me Ramnik if Instinctive is too long. It is actually a mouthful for me as well. Good job it appears automatically rather than having to be typed each time I respond.

Take care

Ramnik

[Lambs]

HI Ramnik, not doing too badly, as entering the 'quiet zone,' when clients receive their letters asking for information, and promptly ignore them 'til Jan!

Apologies for truncation of names: it's a long-standing habit from other fora. From now on, I shall endeavour to call you Ramnik, but why use the name "Instinctive," if your prefer the former?

(A rhetorical question, no need to explain).

Best wishes,

Lambs

[Lambs]

Sorry, in answer to your initial query, if you are struggling for something to make you sleep, check out s. 164 TCGA.

Lambs... doing tax for WAY too long.