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CGT and changes to joint ownership of rental property

lesleyd
Posts: 5
Joined: Thu Jan 16, 2014 1:44 am

CGT and changes to joint ownership of rental property

Postby lesleyd » Fri Jan 12, 2018 7:34 pm

Husband and I Sold rental property last year for 234500 and currently preparing to submit returns. I would like to clarify a couple of things that we are uncertain about.
Brother and I inherited this property early 2011 - At probate we were too conservative re property value 193k as we fully intended to sell and our mothers estate fell well within IHT threshold. Property was marketed at 205000 in 2011 ( I have evidence dated april 2011) however we were advised to rent property as letting market was more buoyant - tenancy started early 2012.
My brother needed to realise his share so I transferred amounts of money to value of just over 100k over 2012 to 2014.
I ran the property rental myself and took care of all income and tax due. I have a letter of agreement to this effect.
In 2015 he relinquished any claim and his share was transferred over to my husband ( via a solicitor).
Now that I come to complete the CGT pages on returns I wonder that there is something we have missed and should sort out. I will have to pay CGT for half of gain between 2011 and 2016. My husband half gain between 2015 -2016 ( I can get an estate agents letter of valuation backdated to 2015 - I estimate this to be in region of 220000).
Having read more guidance and information about CGT I am worrying about any implications for my brother - Is the money I paid him for his share considered a gain if so I estimate this gain at half of 220k less 205k - therefore well within CGT allowance. Are there any other factors that I need to consider? How should I word all this to HMRC within our returns?

I hope someone can clarify things for me . In anticipation
lesleyd

bd6759
Posts: 2450
Joined: Sat Feb 01, 2014 3:26 pm

Re: CGT and changes to joint ownership of rental property

Postby bd6759 » Sat Jan 13, 2018 12:53 pm

You inherited a half share in 2001 with a value of £96,500.

Your brother sold you his half share in 2012 for £100,000. (Your brother's gain is below the annual exempt amount).

Your total cost is £196,500. You gave half to your husband. You each have a cost of £98,250.

You sold it for £234,500. Let's says 232,500 after costs.

You each have a gain of £18,000. Maximum tax bill of around £1800 each (less if you are a lower rate taxpayer).

lesleyd
Posts: 5
Joined: Thu Jan 16, 2014 1:44 am

Re: CGT and changes to joint ownership of rental property

Postby lesleyd » Mon Jan 15, 2018 6:59 pm

Thanks for the information.
I can see that I was starting from the more recent facts and working backwards. It makes sense to track the calculation from the start back in 2011 to 2016. However I am now not certain how to record this in CGT tax return pages, particularly my husband's return. Perhaps I am will need to provide explanation in the information boxes. Also I hope to use the market value figure of 205000 as opposed to the nominally low probate figure of 193000. Is there anything I can do to support this.
thanks Lesley

bd6759
Posts: 2450
Joined: Sat Feb 01, 2014 3:26 pm

Re: CGT and changes to joint ownership of rental property

Postby bd6759 » Mon Jan 15, 2018 7:20 pm

Considering it was ony worth 200,000 in 2012, the higher figure seems unlikely.

Your acquisition cost is the probabte value. You would need to get the probate value changed.

There is nothing complicated. Half of the amounts go in your return and the other half in your husband's return. Half the sale price, half the costs and half the gain.


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