How do I avoid paying so much CGT - can i give money away?

mo · Postby mo » Mon Jun 30, 2003 11:58 pm

My mother signed over her house to my brother and myself 10 years ago.
The value then was 50k and now is 120k. I pay tax at 40%.
My brother wants to buy me out so I think I have a tax liability for my half of the sum ie. 60k - 25k = 40% of 35k.
I want to minimize this. I believe I can space the gain over 2 years but can I give any of my gain away to my children and avoid tax altogether?
My idea would be to give the 4 children 5k each(20k in total)leaving a gain of 15k for me and I would space thois over two yers and avoid the tax due to my 7.3k allowance per year.

Any help appreciated.

accountant@uktaxshop · Postby **accountant@uktaxshop** » Tue Jul 01, 2003 1:00 am

Mo,

The good news is that over the 10 years of ownershop, you will have benefited from some reliefs (indexation and taper relief) which have reduced your gain to approx Â£25k.

You suggestion of gifting to your children will not removed the CGT liability as this is seen as a chargable transaction. Your mother was able to do this as it is her principle residence and so exempt. If applicable you could gift a half share, or all the property to your spouse free of tax. You could then utilise two lots of CGT allowances, for each of the two years you are selling the property.

If you need a hand planning the numbers, and filling in the returns please get in contact.

Regards

James Smith
Chartered Accountant
www.uktaxshop.co.uk
01284 764436

mo · Postby mo » Tue Jul 01, 2003 6:08 am

Thankyou for the advice - it sounds as though you have a solution for me.

Ian McTernan CTA · Postby **Ian McTernan CTA** » Tue Jul 01, 2003 8:36 am

I think you should beware of falling foul of the 'scheme of arrangement' rules which could be appled to such a scheme. Also, selling over two years could be deemed to be a sale in year one, and very careful drafting of any agreement would be required as any mention of the sale of the whole share over two years could crystallise the gain in year one (sometimes without sufficient funds to pay the tax). Consult a property lawyer to ensure everything is done properly, not a basic conveyancing service, who should be able to arrange an effective scheme.

Ian McTernan CTA
McTernan Associates Ltd
ian@imcternan.com

mo · Postby mo » Mon Aug 11, 2003 1:22 am

Dear Both,
Thanks for the previous information, but now the plan has changed. My brother and I now intend to sell the house and we hope to clear Â£130k between us.
My question is this, the suggestion of gifting half of the property ( or even all of it) to my wife is fine by me in order to take advantage of her CGT allowance as well, but do i need to change the ownership of the property before we complete the sale, OR can I do it afterwards. If I can do it after the sale, then obviously the conveyancing can proceed as normal.

Thanks MO