PPR query

[cturner]

MY mother and father had two homes cal them house A and House B both owned since 1970 . Neither declared explicitly as PPR, but House A was effectively PPR as they spent 80% of year there in the past . Father dies may 2011. In this year since April mother has spent 7.5 months at house B (can evidence) becausue of the death. Can that now be declared her PPR and if she then disposes all or part of it by way of a gift would she not be liable to CGT? . Or is the PPR based on the evidence over a longer period than 1 year. I've looked at hmrc and dont follow it fully .

[mullet]

Relief (which requires a property to truly be a residence, not just a place where a person might stay sometimes) is based on the period of ownership. So even if house B truly became a residence now then that status would not wipe out nearly 30 years of history (it's 30 years because the time counts only from 31-03-1982).

If sold soon, at worst your mother will be exposed to full CGT on the ultimate disposal of this second property. At best she might have 3 years out of 30 years' relief available. Why are thinking about gifting? Is there potential IHT liability?

[cturner]

Thanks so it cannot be her PPR then. She wants to gift some part of one property but realises it will be a gift with reservation of benefit and implications. Yes on her death there woul be IHT at present of about £500k largely because of the two properties' value.


The Full CGT could be quite a lot, although it is quite a complicated equation.

[pqtaxation]

.... She wants to gift some part of one property but realises it will be a gift with reservation of benefit

You have previously described in much more detail the circumstances at:

http://www.taxationweb.co.uk/forum/cgt-on-house-my-mother-originally-inherited-t36668.html

Re house B, your mother has a base cost for capital gains tax (CGT) from March 1982/1996 for 50% and for the other 50% a base cost at time of your father’s death (market value of entirety less 10% for having only a 50% holding).

It’s not clear how house A was owned on your father’s death but presumably it was always their PPR.

As mullet indicates, PPR relief on house B is not available or of benefit in these circumstances and there would probably be CGT to pay if your mother gifted the entirety of house B and such gift would be ineffective for IHT mitigation if she continued to live there.

If your mother does plan in future to reside at house B for the vast majority of her time, as she has since your father died, might it make sense for her to gift house A to you and your sister as a PET (with no CGT or SDLT payable); and if you to retain it (empty) for her to pay market rent to you for the little time she will spend there so that she retains no benefit from house A and the PET becomes successful after 7 years.

[cturner]

Thanks for that