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Where Taxpayers and Advisers Meet

A CG, IHT and gift tax confusion

overweightemon
Posts:3
Joined:Wed Feb 19, 2020 7:52 pm
A CG, IHT and gift tax confusion

Postby overweightemon » Fri Feb 26, 2021 9:32 am

If a parent sells their house because they move in with a new partner and gifts the money to children, the children spend some time thinking on what to do with it but it sits in a bank for 6 months unused. The parent's circumstances change (relationship fail) and the parent needs somewhere to live again so the children buy a house in their own names but let the parent live in it rent free, and seven years pass.. What is the tax position of everyone involved?

Was it a gift with reservation of benefit? If a GWROB means the new property is part of the parent's estate even though the children's names are on it, what is the CG liability if the property is sold? Do the children get banged for it or is it the parent's PR and entitled to relief "because it was always the parent's property"? If the parent wants the house they move to to be in their own name rather than the children names, are the children making a gift to the parent?

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: A CG, IHT and gift tax confusion

Postby pawncob » Fri Feb 26, 2021 11:55 am

Firstly consider if any of these statements are backed by evidence.
Was the "gift" evidenced by letters/deeds etc. Was it a joint account? Who had withdrawal rights? Were they holding it in trust?

If it all happened 7 years ago, then any IHT liability should be irrelevant. GWROB may not apply depending on evidence of gift.
It isn't parent's PPR because the parent didn't own it, regardless of GWROB position.
If children gift property to parent, it's liable to IHT, with some tax due depending upon value.
With a pinch of salt take what I say, but don't exceed your RDA

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: A CG, IHT and gift tax confusion

Postby AGoodman » Fri Feb 26, 2021 2:33 pm

If not a GROB, you will need to consider pre-owned asset tax, which imposes an income tax liability on the mother for providing the funds used to buy the house. I'm afraid I don't have the energy to dig it out as it's a horrible area.


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