owning 2 properties

[bazil]

I own a £140,000 house with an outstanding mortgage of £25,000, I have inherited 5/12 of a house with my brother who will inherit 7/12.its value being £180,000 I wish to buy the house and carry on living in my own house whilst working on the other and _maybe_ in future move into it, upon selling the remaining house would capital gains be payable on either and would a time period affect this, I am looking to avoid if possible any tax burden ?

Thanks for any answers.

[accountant@uktaxshop]

Assuming you do eventually live in the second house after it is renovated, you could elect this as your main residence now, although this could be challenged if you do not actually live there.

So long as you sell your current home within 3 years, there will be no CGT liability on its sale, even if it is not your PPR.

If you do come to sell the second house you would then have PPR relief available for the whole period.

Two other thing to note, the transfer itself will attract stamp duty, equivalent to 7/12*180,000*1%=£1,050.

On your brothers sale there could also be some CGT. The transfer to you (for CGT purposes) will be at market rates when it is transferred, less the base cost your brother acquired it at, which is the estate valuation. Assuming his 7/12ths of the house hasn’t risen in value by more than his annual exemption (£7,900), there would be no liability.

In the event there was some CGT and it is less than 2 years since the date of death, a deed of variation could be passed to pass the property directly into your hands. This would avoid both CGT and stamp duty, however this would have to be balanced against the legal fees involved.

If you need some help, accounting or legal, please let me know.

Regards

James Smith
Chartered Accountant
01284 7644436

[bazil]

to add to the first question above: my mother died in October 2002 who left 75% of the house to us shared as stated above, my father died in December 2002 and left the remaining 25%, both died wishing the house to be shared as 5/12 to myself and 7/12 to my brother, you mentioned selling my current home within 3 years, from which date, is it one of the dates of death or is it one of the dates of probabe that this 3 years from, be applicable to ?

Thanks to anyone for any help on this.

[accountant@uktaxshop]

The 3 years would run from the date you make the election, and it is therefore no longer your main residence, and exempt from CGT.

As your parents have both passed away recently, it would be possible to make the deed of variation, as above to avoid CGT and Stamp duty if you wished.