CGT on Property

[page853]

Hi........wonder if someone could provide some advice if possible.......relates to my parents house which was gifted to me in 2002.

My parents property was gifted to me in 2002 - there was a restriction put on the property such that I couldn't sell it without their approval and they could live in until they died if they so wished. My mother passed away in 2009 and my father in 2012. I lived in the property from 1961 until 1986.

The property was put into joint names(with my wife) in 2014 and the selling restriction removed.

I was tentatively advised(by an accountant) that I could possibly get round a large chunk of CGT in that the selling restriction could be argued as an implied trust so the starting position (for CGT purposes) would be the value of the property in 2012 rather than zero (as it was gifted).

Anyone know whether the implied trust would be accepted by HMRC so the starting position for CGT purposes is the value at 2012?

If I can't use 2012 as a starting value what do I use as the starting point for CGT purposes - zero(as it was gifted) or value at 2002 ?

Also, in order to to reduce CGT as much as possible could I alter my main residence to this property ? If so how long would it need to be ? And how much CGT would I save ?

Thanks in advance.

[page853]

We are in the process of hiving off a portion of the land the house has to sell separately with planning permission

[bd6759]

Lets start with purpose, and see what we can do around that,

What was the purpose of the gift to you in 2002? Why did your parents do this?

[page853]

Hi thanks for the reply.....does that have a bearing on the starting value ?

[someone]

Depending on what you were trying to achieve back in 2002 will probably affect what sort of trust was created.

Tax law has changed in the intervening time and changes how such trusts are taxed.

The three reasons I've heard of for doing this are: IHT, avoiding care home fees and avoiding the need for probate for an estate. There are probably many more.

[bd6759]

And none of those would have been effective, especially if there was a trust.

The starting value is the value of the property when it was gifted to you.

[page853]

Hi thanks
so in terms of an applied trust....the starting value would be the value back in 2002, not when my father died in 2012 as effectively i couldnt sell it until then.

[bd6759]

You mean implied trust. The "implication" is that your parents always owned it, even although it was in your name.

For tax purposes, the disposal and acqusition costs of an asset will (nearly) always be at market value. If your parents disposed of it to you by way of gift, it will be deemed to be at market value. That will be your acquisition cost (unless you never acquired it until you inherited it, in which case it will be the probate value - it was included in the value of your parent's estate wasn't it?)

[page853]

Hi
no property wasnt included in my parents estate

[bd6759]

Then it looks like the IHT returns are incorrect.

The problem you face is the worst of both worlds. You were given the property at its 2002 value. However, because your parents continued to live in it, it was a gift with reservation of benefit. That means it remains part of their eatate for IHT purposes.

If your parents had not gifted it to you, you would have inherited it at its 2012 value.

You really ought to have taken advice back in 2002, and reaally must seek proper advice now.