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Where Taxpayers and Advisers Meet

CGT on disposal

JimLittle
Posts: 9
Joined: Thu Nov 19, 2015 6:36 pm

CGT on disposal

Postby JimLittle » Tue Mar 24, 2020 4:06 pm

My parents are in the process of selling a property where they have lived in and currently renting it. I am managing the property on their behalf since they are in their 80's.

They are currently have a buyer for the property but due to recent events the sale has been delayed even though it was close to exchange.

Now if they sell after 5th April they will get no letting relief.

Changing the legal ownership would be a problem potentially with the solicitors / buyers.

Could we draw up a declaration of trust transferring the property to transfer the beneficial interest for income and property to the sons then back again to the parents after 5th April.

I understand its risky as could be perceived as tax avoidance but hoping HMRC would see this favourably considering the extraordinary circumstances.

maths
Posts: 7952
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT on disposal

Postby maths » Tue Mar 24, 2020 7:41 pm

Have you worked out the extra CGT which will be payable re a post 5 April "exchange" before you try and manipulate the transaction and incur unnecessary costs?

I certainly would not believe
"but hoping HMRC would see this favourably considering the extraordinary circumstances".

JimLittle
Posts: 9
Joined: Thu Nov 19, 2015 6:36 pm

Re: CGT on disposal

Postby JimLittle » Tue Mar 24, 2020 10:11 pm

Thank you for the reply

Yes we have done the calculation and its around 15K CGT after 5th April and 0 before.

Certainly this deal likely would gone through if it wasn't for the Virus.

maths
Posts: 7952
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT on disposal

Postby maths » Tue Mar 24, 2020 11:20 pm

Transfer from parents to children by way of a declaration of trust could, per se, be done so that parents' disposals occur pre 6.4.20 for cgt purposes.

A replacement trust could then subsequently be executed transferring the property back. This would be a cgt disposal by children.

If no mortgages then no SDLT charges. However this could potentially adversely affect the children from qualifying as First Time buyers in the future.

However, I suspect that such an arrangement would be perceived as circular and pre-planned. There are various tax anti-avoidance provisions.

I would leave well alone. You don't need HMRC on your back when you're 80 +.

JimLittle
Posts: 9
Joined: Thu Nov 19, 2015 6:36 pm

Re: CGT on disposal

Postby JimLittle » Wed Mar 25, 2020 9:54 pm

Thanks for the reply

Yes i agree with you its risky and wouldst want to put my parents through HMRC investigation

I just thought HMRC would be little sympathetic in the light of COVID-19 which has delayed the sale

maths
Posts: 7952
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT on disposal

Postby maths » Wed Mar 25, 2020 11:37 pm

I just thought HMRC would be little sympathetic in the light of COVID-19 which has delayed the sale
Well, you never know. I'm sure Ghengis Khan did the odd favour.


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