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Where Taxpayers and Advisers Meet

Gifted derelict property

r4chy
Posts:2
Joined:Fri Jun 15, 2018 9:07 am
Gifted derelict property

Postby r4chy » Fri Jun 15, 2018 9:28 am

Hi all, apologies this is a fairly complicated situation and I am in the process of seeking professional advice, however I need some help fairly quickly and thought this was a good place to come!
My dad is going to gift me a property which is currently derelict and in desperate need of repair. I have a builder who is ready to start the work in just over a weeks time, however some last minute conversations yesterday with HMRC have got me in a bit of a spin!
The property has not been signed over yet and I wasn't in any rush to do this as the initial renovations are being paid for in cash. However speaking with HMRC yesterday they advised that the amount of CGT liability would be based on the value at the point of transfer, therefore by carrying out the repairs prior to transfer I would be increasing the liability.
Question 1. Would the repair costs (roof, Windows, doors) be deductible from the gain?
Question 2. Would the gift be eligible for CGT holdover relief due to the value being nil rated for IHT (current value is probably somewhere between 50-100k, once initial repairs are complete 150k)?
Question 3. If eligible for CGT holdover relief then does this reduce my dad's IHT allowance even if he lives longer than the 7 years?
I'm unsure as to whether to hold off the builder until the transfer is completed however doing so potentially means that the repairs won't be started until next year and there will be further damage sustained over the winter.
Thanks in advance, please let me know if you need any more information.

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm

Re: Gifted derelict property

Postby SteLacca » Fri Jun 15, 2018 9:51 am

It's not that complicated. Enhancement costs are an allowable cost for CGT purposes, and effectively increase the base cost for the calculation. The base cost without those is OMV at the date of the gift.

However, your father will also need to consider his CGT position, since this will be an OMV transfer and, if OMV is greater than his acquisition cost, he will be chargeable to CGT on the increase.

Holdover relief won't be available.

AdamS93
Posts:268
Joined:Tue Sep 26, 2017 6:28 pm

Re: Gifted derelict property

Postby AdamS93 » Fri Jun 15, 2018 10:11 am

You are barking up the wrong tree.

There will be no holdover relief for a residential property.

The gain will either be Market value less cost now, or market value less cost (which will include renovation costs) in the future.

For IHT, it will be considered a PET as well. This means if your farther were to pass away within 7 years of the gift IHT will need to be considered as well.

You need to get tailored advice as it will cost you thousands in CGT and potentially IHT.

You also want to be aware about the transactions in land rules which may come back to bite you...

r4chy
Posts:2
Joined:Fri Jun 15, 2018 9:07 am

Re: Gifted derelict property

Postby r4chy » Fri Jun 15, 2018 12:03 pm

So the transfer would be a PET as it was going directly to me rather than to a trust? If I were to do this I could then Holdover at the point it was transferred out of trust?Holdover relief has previously been claimed as it is an agricultural property but from what I understand this can now no longer apply as the property is currently derelict. @AdamS93 can you please explain what you mean by "transactions in land rules" as I dont want anything I havent thought of to come out at a later date?!


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