Second home gifting and or IHT implications

[steve234]

My very healthy parents in-law are in their 70s and have a second property which they share with their two daughters, so they all have 25% each. Their other assets already exceed the 20/21 Tax threshold. Although getting a tad late they want to mitigate their IHT liability and are considering gifting their remaining 50% to the daughters equally.
My in-laws have an effective capital gain on their 50% of £100k. My understanding is that if they gift their share of the property they will be liable to Capital Gains Tax of 28% on £76k (£100k CG less joint CG Allowance of £24,00) being £21k.

My two questions are:
1. If they gift their 50%, incur the CGT charge and then die after a year, will they effectively be double charged once via CGT on the disposal and again via IHT as the gift is clearly within seven years.

2. Separately, can they gift their 50% of the second property to their daughters in tranches of £24k (their joint annual Capital Gains allowance) over four years, by way of amending the Tenants In Common arrangement and effectively eliminate the CGT liability. Hopefully then, living beyond the following seven years.

Many thanks in advance

[maths]

1. Yes

2. Yes

Rates of CGT re residence sales/gifts are 18% and/or 28%.

Where a lifetime gift is made from X to Y and X dies within 7 years any IHT liability is that of Y albeit calculated on the basis of X's record of lifetime gifts and nil rate band.

On any future sale by daughters as they won't have lived in the property whilst they own an interest will be subject to CGT on any capital gain.

Don't forget each parent has a £325k nil rate band plus a £175k residence nil rate band (post 5 April 2020) for IHT and and there is an automatic uplift on death for CGT ie gain isn't subject to CGT.

Maybe worth running a few numbers as to see the best option; there's always a conflict between CGT and IHT mitigation.

[steve234]

Many thanks for your reply , so adding simple numbers....considering the situation of

a) my in-laws gifting now their £500k share of their second property to my wife, which has increased in value by £100k ; and
b) my in-laws then passing away in a years time, (with the £1m IHT allowance already utilised in 20/21 by other assets)

My understanding is that there will be:

1. a 28%/£28k CGT bill (assuming a higher rate taxpayer) on the immediate gift.
2. a 40%/£200k IHT charge as the gift becomes a chargeable transfer within the seven years


Qn .I assume that CG charge is to the parents or not the beneficiary/my wife?
Qn. When it comes to paying/calculating the IHT, is their any offset/adjustment for the CGT paid on the gift being within the 7 year rule OR is it just v bad luck in that the family effectively pays both the initial £28k CGT AND the Is their any offset?