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Where Taxpayers and Advisers Meet

Tax liability

regiment
Posts:21
Joined:Wed Aug 06, 2008 3:16 pm
Tax liability

Postby regiment » Mon Dec 09, 2019 10:27 pm

My sister and I have recently inherited our deceased parent’s home. It is valued at approximately £300,000. I already have a home of my own and my sister does not

I would like to make her a gift of my half of the property but am concerned that in making the gift I may make myself liable to some sort of tax liability

Any advice that might be offered on how to best make this gift to my sister would be greatly appreciated

strawn
Posts:54
Joined:Fri Jun 01, 2012 10:11 am

Re: Tax liability

Postby strawn » Tue Dec 10, 2019 12:38 am

Consider doing a Deed of Variation/Instrument of variation on the will so that the effect is that the whole house is left to your sister. This must be done within two years of the death.

Then there should be no chance of any Inheritance Tax complication for your estate in future.

https://www.gov.uk/alter-a-will-after-a-death

popular
Posts:12
Joined:Sat Jun 17, 2017 3:26 pm

Re: Tax liability

Postby popular » Wed Dec 11, 2019 5:08 pm

I am in the same situation as Regiment, although my deadline for a deed of variation has expired.

I have been advised that if I make a gift of my half of our late parents property to my sibling I will incur a PET that will require 7 years to expire; but also that I will incur an immediate capital gains liability on any increase in the value of my half since I inherited it from my parents, should I make the gift.

My age is such that the PET should not be a problem, but the CGT liability concerns me.

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: Tax liability

Postby jerome.lane » Thu Dec 12, 2019 9:52 am

I am in the same situation as Regiment, although my deadline for a deed of variation has expired.

I have been advised that if I make a gift of my half of our late parents property to my sibling I will incur a PET that will require 7 years to expire; but also that I will incur an immediate capital gains liability on any increase in the value of my half since I inherited it from my parents, should I make the gift.

My age is such that the PET should not be a problem, but the CGT liability concerns me.
A gift of your half will have a lower market value than an exact half of the whole, so it might not be as bad you think. When was the inheritance and how much has the value increased by?
Jerome Lane
Tax Adviser
Telephone: 07943 005902

popular
Posts:12
Joined:Sat Jun 17, 2017 3:26 pm

Re: Tax liability

Postby popular » Thu Dec 12, 2019 5:15 pm

The value of the property at probate 4 years ago was £520,000. It is valued at present at £680,000 so the gain is substantial. My sister and family have lived in the property at no cost since the death of our parent

strawn
Posts:54
Joined:Fri Jun 01, 2012 10:11 am

Re: Tax liability

Postby strawn » Thu Dec 12, 2019 8:56 pm

A gift of your half will have a lower market value than an exact half of the whole, so it might not be as bad you think. When was the inheritance and how much has the value increased by?
I have a memory that I somewhere read that a reduction of 15% might be allowed by HMRC. But on this matter I wouldn't trust a vague memory from the distant past.

Is there any possibility that it would be cost effective for popular to gift part of his share to his spouse so that she can later gift it to the sibling, thus using her CGT exemption?

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: Tax liability

Postby jerome.lane » Fri Dec 13, 2019 9:59 am

A gift of your half will have a lower market value than an exact half of the whole, so it might not be as bad you think. When was the inheritance and how much has the value increased by?
I have a memory that I somewhere read that a reduction of 15% might be allowed by HMRC. But on this matter I wouldn't trust a vague memory from the distant past.

Is there any possibility that it would be cost effective for popular to gift part of his share to his spouse so that she can later gift it to the sibling, thus using her CGT exemption?
This is a possibility. The occupier might be happy to pay the CGT liability given what she is getting in return. This would avoid all the admin hassle.
Jerome Lane
Tax Adviser
Telephone: 07943 005902


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