This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

CGT v IHT

Vicki
Posts:3
Joined:Wed Aug 06, 2008 3:52 pm

Postby Vicki » Sun Apr 29, 2007 5:32 am

I should be grateful for some advice on this problem. In 2001 my mother, worried about someday having to go into a home, transferred ownership of her bungalow to my brother and I. She died in July 2006 and as this was within the 7-year period the value of her bungalow was included in her estate for IHT purposes. As the value of her estate was however well below the limit then no IHT was payable. The bungalow was sold towards the end of 2006
I am due to complete my SA return shortly and wonder if I will be liable to CGT on my share of the gain on the sale of Mum's home. If it was hers for IHT purposes can it be also mine (& my brother's) for CGT purposes? Had her estate exceeded the limit IHT would then have been paid on the property so would the charge of CGT on its sale not be a form of double taxation? Alternatively, if it was hers for IHT purposes at the time of her death, should the gain not be calculated on the valuation at that time rather than at the time of the transfer?

Thanks in anticipation.

Vicki

PS I have no problem with the calculation of the tax, itÂ’s just the principal!

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Postby Peter D » Sun Apr 29, 2007 6:23 am

Yes I am afriad you have a CGT liability if you did not live there and you Mum did not rent it forem you. You will been to provide me with the value of the property at the gifting date and the value at disposal with dated and ALL legal fees and your and your brothers salary as this effect the CGT, dates must be at least MM/YYYY and values have to be real questimations do not satisfy HMRC. The value of the property for IHT purposes would have never fallen out of her estate as she continued to have full beneficial ownership of the property and the value would have remeoned in her estate shoulfd the LA have conducted a Care Assessment. If you provide the information I will give you the figures without charge. If Regards Peter

Vicki
Posts:3
Joined:Wed Aug 06, 2008 3:52 pm

Postby Vicki » Sun Apr 29, 2007 6:33 am

PeterD, thanks for the prompt reply. I was fairly certain that this would be the case but could not help but live in hope. As I said, I don't have a problem with the calculations, just the legislation.

Thanks again,
Vicki

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Postby Peter D » Sun Apr 29, 2007 8:04 am

Legal and agents fees, enhancements whilst in your ownership, taper relief, allowances. Are you sure ?? Regards Peter

billypeel
Posts:9
Joined:Wed Aug 06, 2008 3:33 pm

Postby billypeel » Fri May 04, 2007 6:55 am

Vicki, I am not an expert, but have asked the IR about a similar case and they said a beneficial owner gets the PPR uplift. I have also been told by an IR Inspector that beneficial ownership, rather than legal ownership, is what counts when assessing CGT. IR 294, page 4 para 3 might cover your circumstances:
"If on the death of the life tenant a beneficiary becomes absolutely entitled to the property, subject to paragraph 4, there is no gain or loss on that deemed disposal, but the beneficiary is treated as acquiring it at market value."
I would have thought your mother would have been a Life Tenant in an Interest in Possession Trust, whether or not there was any formal document drawn up. She would get the usual PPR uplift.

Vicki
Posts:3
Joined:Wed Aug 06, 2008 3:52 pm

Postby Vicki » Sat May 05, 2007 3:39 am

PeterD/Billypeel
Thank you both for your (further) replies. Sorry I have not been able to get back to you through the week.
Naturally I find Billyp's answer the most promising. Mum was the beneficial owner of the property until her death and it was she who paid all of the bills and for all 'enhancements' made during the last years of her life. I shall download a copy ofof IR294 and write to the NAS in those terms.

Thanks again
Vicki


Return to “Capital Gains Tax, CGT”