selling a gifted property in the first 7 years

[Stewart]

A family property is about to be gifted. It is a 2nd home which has never been used a main residence. (I plan to sell immediately or in the future). Is the donor liable to CGT at the time of gifting?
When I sell I presume I am likely to suffer CGT if there's a gain..is it the gain from the valuation at time of gifting to the time I sell?

On the Inheritance tax.. I am not clear..if the donor lives for 7 years then I understand that the full value of property(at time of original gift or death?) is removed from the IHT figures. Am I correct in understanding that the sliding scale applies if the donor dies between year 3 and 7?

[Nigel Lord]

Stewart

There is CGT on the gain (i.e the difference between the sale proceeds or (market value if transferred at undervalue) and the base cost (including indexation, improvement expenditure) and less reliefs and allowances (e.g. taper relief, annual exemption etc.).

If the property was originally gifted, that would have been a chargeable event for CGT purposes. The gain may have been deferred (held-over) in which case the base cost would be restricted.

Providing the donor survives for seven years from the date of the original gift, there should be no inheritance tax irrespective of this further transfer.

Nigel Lord
Lord Associates
Caxton House
Old Station Road
Loughton
Essex IG10 4PE
020 8508 1642 & 07769 931852
lordassociates@ntlworld.com

[Stewart]

Thanks Nigel
Please clarify whether the IHT liability is reduced on a sliding scale over 7 years or not.
I read in places that the donor has to survive for the full 7 years. What happens if death is before the 7 years?

[Huw Williams]

You have asked about a sliding scale for inheritance tax. Whilst there is one, it is not usually any use.

There is a reduction in the inheritance tax payable as a result of a death within 7 years of a gift. However it is only the tax on the gift which is affected, and this is usually £nil because the property gifted is below the £250,000 nil rate band.

It does not affect tax payable on the remainder of the estate on death and it is usually only on this remainder that any tax arises.

On the CGT issue, it may be possible to reduce the tax which would arise as a result of the gift by making the best use of annual exmptions and holdover reliefs.


Huw Williams
enquiries@huwwilliams.co.uk

[Stewart]

Thanks
I now understand. It's come as a shock but I'm now clear.