Transfer of assets

[c.evans@hotmail.com]

Could anyone advise me of the CGT/IHT implications of the following:

In March 1997 I sold my house and purchased a new flat in London in the name of my mother and father (because, being a student at that stage, I was not eligible for a mortgae on the property). The proceeds of sale of my house went towards the purchase of the flat in London and I lived in it.

In December 2000 my father and mother transferred one third of the flat in which they live in Essex (worth c.£350K) into my name. The flat in Essex is now in the joint names of myself, my mother and father.

In December 2002 my parents mortgaged the flat in which we live and gave/leant me £250K towards the purchase of a new flat whihc I purchased in joint names with my wife.

My questions are:

1. Do I need to include the £250k as a disposal/transfer in my parents' self assessment tax return?

2. Does the transfer of the third share of the flat in Essex amount to a disposal giving rise to CGT? It has not been referred to in any tax return

3. Will the transfer of the third share of the flat in Essex have any affect in terms of minimising IHT as advised by our lawyer or is a 'gift with a reservation of a benefit'?

I am the sole beneficiary in my parents estate

Any help would be appreciated

[steve@nunn-hayward.c]

Hello Mr Evans,

I am not clear if your parents own or are nominess/trustees on your behalf for the flat in London.Iassume the latter.
1) Your parents could either have loaned or have given (not both) the £250K. If they loaned the cash,it is not a disposal for CGT or IHT. If a gift, as it is cash, CGT unlikely.For IHT they have made a Potentially Exempt Transfer (PET) and if they live for 7 years it will fall out of account for IHT. If prior transfers or concerns over health exist special sorts of insurance are available to protect against IHT.
2)CGT is probably technically in point, but as it was your parents Main Residence exemption should be available.
3)In my view the "Gift with reservation" GWR rules are likely to apply as your parents still live there.

It would seem that you may need to step back from the detail of each transaction and assess what your parents and yourself are trying to achieve in the longer term to arrive at a tax efficient stratergy.

I would be pleased to review your requirements and assist with your ongoing requirements. Please give me a call if you wish to take things forward.

Regards

Steve Cook, ATII
Tax Partner
Nunn Hayward, Charterd Accountants
01753 888211