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Where Taxpayers and Advisers Meet

Trust query

stb london
Joined:Sat Aug 29, 2015 1:18 pm
Trust query

Postby stb london » Sat Aug 29, 2015 1:23 pm

I live in my mother's second property and she would like to transfer ownership to me during her lifetime. I have been told that she can do this by land registry transfer under 'natural love and affection law'.....What does this entail and will either one of us still have to pay CGT or inheritance tax?
I also understand that there is some provision for a trust to be set up which is recognised under uk law which will also mean not having to pay CGT etc.

Joined:Wed Aug 06, 2008 3:55 pm

Re: Trust query

Postby LozaACCS » Sat Aug 29, 2015 3:36 pm

Never come across love and affection law, sounds interesting though.
If your mother gifts her property to you she will be exposed to both CGT and IHT.
For CGT purposes she will be treated as having disposed of the property to you at its market value at the time of transfer, the cost of the property and any capital expenditure are deducted from the market value to calculate the gain, relief may be available if she has at any time lived in the property as her main residence.
For IHT purposes she will have made a transfer of value of the market value, (less any available annual exemptions (3k pa),(max 6K) this is termed a Potentially Exempt Transfer (PET).
The PET becomes chargeable if death occurs within 7 years and her chargeable estate exceeds her available nil rate band.
The capital gain can be held over (not avoided) if the gift is instead to a trust.

Joined:Wed Aug 06, 2008 3:22 pm

Re: Trust query

Postby King_Maker » Sat Aug 29, 2015 4:06 pm

"Natural love and affection" is often used as a Recital in a Deed of Gift.

Return to “Capital Gains Tax, CGT”