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Where Taxpayers and Advisers Meet

Buying parents second property

Johnnyessex
Posts:3
Joined:Sat Feb 18, 2017 1:49 pm
Buying parents second property

Postby Johnnyessex » Sat Feb 18, 2017 2:04 pm

Hello all and thank you for taking the time to read this, i'm hoping someone could shed some light on this....

Due to my personal financial situation in 2012, I sold my property to my parents under market value at £145k (was worth £200k) they paid £75k cash and £70k mortgaged (I then carried on living there). now in 2017 i'm in a better financial position and I'm ready to buy the property back, my parents have no interest in making money from this they just want their £145k. The property is now valued at £300k. How does this work with Capital gains tax? I have been told they would have to pay CGT on the difference between £145k (selling price) and £300k (Market value) I cant see how this can be right as how can my parents be charged capital gains tax when they haven't made any gains from it?

I very much look forward to your views/advise.

John

Johnnyessex
Posts:3
Joined:Sat Feb 18, 2017 1:49 pm

Re: Buying parents second property

Postby Johnnyessex » Sat Feb 18, 2017 3:37 pm

Hello all and thank you for taking the time to read this, i'm hoping someone could shed some light on this....

Due to my personal financial situation in 2012, I sold my property to my parents under market value at £145k (was worth £200k) they paid £75k cash and £70k mortgaged (I then carried on living there). now in 2017 i'm in a better financial position and I'm ready to buy the property back, my parents have no interest in making money from this they just want their £145k. The property is now valued at £300k. How does this work with Capital gains tax? I have been told they would have to pay CGT on the difference between £145k (selling price) and £300k (Market value) I cant see how this can be right, how can my parents be charged capital gains tax when they haven't made any gains from it?

I very much look forward to your views/advise.

John

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Buying parents second property

Postby maths » Sat Feb 18, 2017 4:11 pm

As you and your parents are "connected" for CGT then irrespective of the price actually paid it is assumed that market values apply.

Hence on sale by parents the capital gain is 300k less 200k ie 100k (even though I appreciate your parents haven't actually made any gain).

If you sold to both parents each will have a gain of 50k.

Each will have an annual exempt amount of 11,100 to deduct from the 50k.

Johnnyessex
Posts:3
Joined:Sat Feb 18, 2017 1:49 pm

Re: Buying parents second property

Postby Johnnyessex » Thu Feb 23, 2017 4:16 pm

Many thanks for your reply


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