Selling Proprty for nominal fee for CGT/ IHT

[hpsims]

HI all could you please advise on a query i have.

If I have a property worth £180,000. I wish to sell this to a relative for a £10 nominal fee, I am currently already over the IHT threshold of £350,000 so woul d have to Pay either CGT or IHT if i was to sell the property for £180,000.

1. Am i able to do this.

2. There is no CGT / IHT to be incurred as i have sold this for only £10 but am makeing a loss on the sale as i purchased for £100,000 can this be offsetr against other gains made.

3. Are there any legal implicatiions that would prevent this or Taxation restricitions preventing this.

hpsims

[Peter D]

As this is a disposal not at arms length, i.e. it is a relative, then the deemed value will be the Open Market Value (£180,000) not the £10 so CGT will apply and the value will still be accounted for if your estate requires an IHT calculation. The IHT threshold by the way is £325,000 not £350,000. Regards Peter

[Incredulum]

No there would be no IHT to pay on the transfer. If you survive 7 years then after the transfer then there would never be IHT to pay.

[mullet]

A disposal to a "connected person" is deemed not to be at arm's length, and therefore takes place at market value. "Relatives" for CGT purposes includes parents & grandparents etc going upwards, children and grandchildren going downwards, and siblings. And the spouse or civil partner of all of these. Aunts, uncles, cousins, nephews and nieces are not "relatives".

But you can't sell to a cousin for £10 thus realising your loss, and then get that cousin to sell to your original intended relative for £10 at no gain/no loss. The connected persons legislation is merely a shortcut to save HMRC the hassle of arguing whether or not a particular transaction is at arm's length.

A disposal is also deemed not to be at arm's length if either party to the transaction receives a gratuitous (undeserved) benefit - in other words selling it at over or under value. It's maybe easier to look at what an arm's length transaction is - it is a deal between a willing buyer and willing seller with each party to the transaction getting the best deal that they can from that transaction in their particular circumstances. Hope this helps.

[Generix]

it is a deal between a willing buyer and willing seller with each party to the transaction getting the best deal that they can from that transaction in their particular circumstances. Hope this helps.

Well if you have a willing buyer and a willing seller that are relatives and the best deal for their circumstances is to avoid the tax by having a nominal value does that mean its at arms length

[Incredulum]

An arms length price is the price that would be agreed in the open market. I can conceive no reason why I should wish to sell a property to you for a tenner, Generix!

[mullet]

The context of "the best deal in their particular circumstances" covers (for instance) someone selling in a hurry for a lower price or not realising they have an asset of greater value - a bad bargain is not necessarily a disposal otherwise than by way of a bargain at arm's length.

[Generix]

An arms length price is the price that would be agreed in the open market. I can conceive no reason why I should wish to sell a property to you for a tenner, Generix!

Because you don't believe in Capitalism, you're in a particularly generous mood and have decided to spend the rest of your life living off the land in the Scottish highlands?

[section 44]

With regards to legal implications, provided that it is all properly documented (transfer deed etc), there shouldn't be a problem with this.

Presumably you would not be receiving any other benefit from the transferee?