This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

CGT on gift of property - interaction with IHT

JudgeAndy
Posts:1
Joined:Tue Sep 05, 2017 12:59 pm
CGT on gift of property - interaction with IHT

Postby JudgeAndy » Fri Sep 08, 2017 11:26 am

My widowed sister wants to give an investment property to her son (my nephew). She bought the property several years ago. It's mortgage free and has been let to tenants throughout the time she's owned it. She understands she'll have to pay CGT for the privelege of giving the property to her son but asks me (in my role as her executor) what happens with regard to IHT if she fails to survive for 7 years following the gift. It rather looks to me like her Estate could take a hit for IHT even though she's paid the CGT on the gift. This wouldn't happen if she sells the property.
HMRC Capital Taxes Enquiry office refuses to answer hypothetical questions about tax law and refer me to the HMRC website which, so far as I can see has no information on this topic.
Has anyone come across/dealt with this situation?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT on gift of property - interaction with IHT

Postby maths » Sat Sep 09, 2017 3:21 pm

A gift or sale of the property will give rise to a CGT charge on any gain (a deemed gain if the disposal is by gift).

No IHT arises if the property is sold to the son (but of course son needs funds to effect purchase).

If no other gifts have been made prior to the gift of the property and death occurs within 7 years IHT only arises if value of gift exceeds £325,000. Any IHT charge is payable by the son not your sister.

The amount of the £325,000 if used against the gift will reduce that amount for offset against sister's estate on death.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: CGT on gift of property - interaction with IHT

Postby bd6759 » Sat Sep 09, 2017 10:01 pm

This wouldn't happen if she sells the property.

Actually it would. If she sells the property, the value of her estate does not change. Instead of having a property worth £x, she has bank balance of £x. She would be liable to the same amount of IHT.
If she gives the property away the amount of IHT is reduced yearly on a tapered basis until she survives 7 years.


Return to “Capital Gains Tax, CGT”