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Where Taxpayers and Advisers Meet

Tax implications of Property given as Gift

Jamesk_uk
Posts:3
Joined:Sat Apr 15, 2017 11:36 am
Tax implications of Property given as Gift

Postby Jamesk_uk » Sat Apr 15, 2017 12:58 pm

Hi there,

Firstly, my apologies if this question has been asked before, and if it has than pleaselet me know with a link to the required information - thanks.

OK...my sister owns a property in the UK, which she wants to either gift or transfer to me as she does not have any interest in the UK as her domicile is abroad with her family. She bought the property in the late 1980s and she did used to visit and stay in the property while here in the UK - but now for about 20 years or so she hasn't and wants to now gift it over to myself.

The property was bought back than for about £40,000, and now it is worth in the region of £700,000 (with no mortgage). What are the tax implications levied on the property if she:

a) - simply gifts the property over to me
b) - she transfers the property to myself for a nominal sale value (say £10 - 20k)
c) - what if i become a joint owner (have my name placed on the deeds also)

Would I incur any tax charges?
What tax charges would she be liable for and how will they get inforced?

With reference to (c) above, if i became the joint owner, than can she remove her name off the deeds at a later date?

Also, if i have been living in the property for a number of years without paying any rent-would that go towards my advantage?

Many thanks for your assistance in this matter.

Thanks
James

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Tax implications of Property given as Gift

Postby bd6759 » Sat Apr 15, 2017 7:40 pm

Disposal of property situated in the UK will give rise to capital gains tax. For a non resident, that will be based on the increase in value from 5 April 2015.

The gain can be apportioned over the whole period of ownership, or you can obtain and use a valuation of the property on 5 Aptil 2015. The disposal proceeds will be deemed to be the market value, no matter how much, or how little, you pay for it. Since you will need to get the property valued for this purpose, you may as well ask for a 2015 valuation as well.

From what you say, the property has, on average, increased in value by £33,000 per year. That means the current taxable gain is about £66,000 giving rise to tax of about £12,000.

There is more information and a useful calculator here:
https://www.gov.uk/guidance/capital-gai ... l-property

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Tax implications of Property given as Gift

Postby bd6759 » Sat Apr 15, 2017 7:42 pm

My calculation was based on her owning it for 20 years. I see that she has owned it longer. The tax liability will be much lower.

Jamesk_uk
Posts:3
Joined:Sat Apr 15, 2017 11:36 am

Re: Tax implications of Property given as Gift

Postby Jamesk_uk » Tue Apr 18, 2017 9:00 am

Hi bd6759,

Thank you for the reply, and apologies about the late reply.

So, from what you are saying is that the tax will be calculated from 5th April 2015? Am I correct. And this is for non-resident owner.

I don't understand the part where you have mentioned that the "gain can be apportioned over the whole period of ownership, or you can obtain and use a valuation of the property on 5 April 2015" ??
I thought the CGT was calculated on the difference between the initial buying value and the current selling value of a property. For example in my example £700,000 - £40,000 = £660,000 - so the CGT would be calculated on £660,000 at the value of 18% (since she is a non-resident). Am I correct in this? This is what is confusing me - as someone did tell me that it is only payable from April 2015 - so I am kind of confused?

And I have perused the link you provided - but it gives three options at the end - which confusing..

I do hope this can be clarified.

Many Thanks
James

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm

Re: Tax implications of Property given as Gift

Postby SteLacca » Tue Apr 18, 2017 10:14 am

Prior to April 2015 there was no capital gains tax arising on non-resident disposals of UK residential property. Hence any gain arising prior to April 2015 will not give rise to capital gains tax.

There are two methods of calculating the gain, either based on valuations at April 2015 and at disposal, or to time apportion the gain during the whole period of ownership to arrive at a figure since April 2015.

Either can be used, see which is more beneficial (i.e. produces the lowest capital gain).

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Re: Tax implications of Property given as Gift

Postby Peter D » Tue Apr 18, 2017 11:22 am


bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Tax implications of Property given as Gift

Postby bd6759 » Tue Apr 18, 2017 10:14 pm

And I have perused the link you provided - but it gives three options at the end - which confusing..
The options are clearly labelled:
The gain calculated from 6 April 2015
The gain determined using a proportion of the gain arising over the period of ownership
The actual gain arising over the period of ownership.

Jamesk_uk
Posts:3
Joined:Sat Apr 15, 2017 11:36 am

Re: Tax implications of Property given as Gift

Postby Jamesk_uk » Thu Apr 20, 2017 11:06 am

Thank you all - for your assistance in the matter.

I shall let you know how things go.
Have a great day.

James


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