tenants in common and cgt

[inbox55]

I own a house on tenants - in - common basis with my mother, and our respective shares are 84% for her, and 16% mine. This is her primary residence, I dont reside there. I have taken over full responsibility for the mortgage payments, and to reflect this we wish to reassign the percentages of ownership to 84/16 in my favour. Iam the sole beneficiary of the house in her will. Can you advise on the tax implications, when I finally inherit the house and it is sold, and can the percentages be reassigned without incurring any tax charge?
Thanks

[maths]

The lifetime transfer from mother to you of a proportion of her beneficial interest will not be subject to CGT as the property has (i assume) always been her sole or main residence. You will be treated as acquiring this interest at market value (MV1).

On her death you will acquire her remaining interest at market value at that time (MV2).

On a future sale by you a CGT liability will arise on any gain ie difference between sales value and [MV1 +MV2] less any annual exempt amount at that time (currently £11,100).

Given you are the sole beneficiary, from a CGT perspective, it would be better for you to acquire nothing at this time and inherit only on death.

[inbox55]

Thanks for the reply. So, does the lifetime transfer of (MV1) to me, come with any conditions attached, such as her having to survive 7 years after the transfer has been made, or am I confusing this with something else? So, to avoid any future CGT liability, it would have been better for her to maintain 100% ownership of the house and then pass to me as part of her estate, as her sole beneficiary, as it comes well under the IHT? I'm confused as to what I have actually "gained" by accepting this transfer, as it appears all I have received, is a future CGT liability? Also, can I interpret from this, that even though I have taken over the mortgage liability, it doesnt really have any bearing on the transfer?
Thanks again
Iain

[maths]

I think you may be confusing CGT and IHT.

For CGT it is true that your CGT position on an eventual sale is worse if mother transfers 68% to you now as opposed to leaving it in her will on death.

For IHT the gift made in her lifetime is a gift with reservation as she is continuing to live in it. It therefore is still part of her estate for IHT on her death. The 7 year period is irrelevant.

The payment of the mortgage payments by you on her behalf doesn't affect the above.

Arguably there is a contract between you/mother under which you are receiving a 68% interest in exchange for agreeing to discharge the mortgage.

Or it's an informal agreement not intended to be legally enforceable by either of you.

[inbox55]

So if we take for example the MV of the house at the time of the transfer was £200,000 and proportioned 84/16. Based on your earlier comments, at some point in the future I'm left the further 84%. The house is then sold for £260,000. The difference between the sale value and the original MV is £60,000. Does that mean my CGT liabilty is 16% of that £60,000 minus any exempt amount (£11,100) ? And the question is, should I, and is there any way of reversing or reducing that proportion that was passed to me as a lifetime transfer, via a declaraion of trust to say 99/1, so that I still have a controlling interest in the property ?