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Where Taxpayers and Advisers Meet

CGT on sale of inherited flat occupied by Grandparents

blondiesmith
Posts:3
Joined:Tue Sep 05, 2017 5:23 pm
CGT on sale of inherited flat occupied by Grandparents

Postby blondiesmith » Tue Sep 05, 2017 5:33 pm

Hi All,

I would really appreciate any insight into my situation that you may have. I have spoken with two different advisors (accountant and solicitor) and been given two different pieces of information, so I'm very confused!

The backstory:

My mother and my aunt purchased my grandparents flat from the local authority in the late 80s/early 90s. The mortgage was in my aunt's name and my mother paid her monthly for her 50% share of the mortgage. My grandparents lived in the flat rent free, although they paid council tax and ground rent/maintenance direct to the management company/council each month. My mother and my aunt did not ever receive any money from my grandparents.

My mother died in 1997, without a will, but everything passed to my father (they were married at the time). My father died in 2001, with a will - leaving everything to me, however the flat was not mentioned in it. I am only child.

My aunt, mother and grandmother had a 'deed in trust' for the flat. I am not mentioned in this. My aunt however did add me to the title deeds in 2009.

My grandfather died in 2003 and my grandmother continued to live in the flat, rent free, until May this year, when she moved into a care home. At this point the flat was put on the market and the sale completed last week. Proceeds were split 50% to my aunt and 50% to me.

(hope you're still with me!).

So, the question is - am I liable for capital gains tax? and if so - as an inheritance? If I inherited the flat, I presume I inherited it when my father died? Or, do I not owe anything because of dependents living relief?

My aunt has been informed by an inheritance specialist solicitor that we owe nothing at all in CGT. I have been informed by a CGT accountant that I owe based no the profit from when I inherited in 2001 to now.

Other figures if it helps:

Value of flat at time of dad's death/probate - £80,000 (my 50% share £40,000)
Flat sold for £190,000 (my 50% = £85,000)
I am a higher rate tax payer

I would be so grateful for any insight!

Thank you so much if you go this far!

Blondie

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

Re: CGT on sale of inherited flat occupied by Grandparents

Postby bd6759 » Tue Sep 05, 2017 6:32 pm

The difference in views possibly stems from the "deed in trust" which you mention. Without knowng what is in it, either could be correct.

blondiesmith
Posts:3
Joined:Tue Sep 05, 2017 5:23 pm

Re: CGT on sale of inherited flat occupied by Grandparents

Postby blondiesmith » Tue Sep 05, 2017 6:50 pm

Thank you bd6759.
The deed of trust states that my grandparents could live in the flat, rent free, for as long as they lived. It guaranteed that they would never be evicted, or the flat sold while they were alive. Hence it only being sold now my grandmother has had to be moved into a nursing home as she is too frail/ill to live independently.

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

Re: CGT on sale of inherited flat occupied by Grandparents

Postby maths » Tue Sep 05, 2017 7:28 pm

It seems mum and aunt acquired the property (ie legal title) holding it on trust for g'parents for their lives. The remainder interest was held jointly by mother and aunt.

When the surviving g'parent moved out (2017) those holding the remainder interest at that time acquired the property.

Mum died and her remainder interest passed to her husband. On death of her husband the remainder interest passed to you.

On g'mother moving out of the property in May 2017 you and aunt each acquired a 50% interest in the property (ie your remainder interests vested in possession).
There would have been a CGT charge on the trustees (due to a deemed disposal and reacquisition) but presumably private residence relief applied and none was in fact payable by them.

The base cost to each of you for CGT purposes is the market value on date g'parent moved out of the property (not in your case when you inherited from dad). On the subsequent sale by you/aunt a capital gain may have arisen on the difference between probate value and sale proceeds.As it seems to have been a quick sale no gain may in fact have been made.

blondiesmith
Posts:3
Joined:Tue Sep 05, 2017 5:23 pm

Re: CGT on sale of inherited flat occupied by Grandparents

Postby blondiesmith » Tue Sep 05, 2017 7:37 pm

That's brilliant, thank you Maths. No increase in value since my grandmother moving out and the sale last week, if anything a slight dip in value. So it seems the solicitor was correct and we don't owe anything. Phew!

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

Re: CGT on sale of inherited flat occupied by Grandparents

Postby maths » Tue Sep 05, 2017 7:40 pm

Assuming my analysis is correct !


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