Capital Gain on Gifted Property

[ubereano]

Good morning,

At present, my father owns a second home (a flat) bought for £140,000 (was valued at £160k at purchase, the seller was bankrupt so reduced sale price) in 2013 now worth £210,000. He spend £15,000 doing it up.

It has been my main residence throughout this period. His income is £30,000, mine is £45,000.

Is it possible for him to gift the property to me, with a view for me to sell it relatively soon after without incurring capital gains tax? I understand it would be liable to inheritance tax (7 year period etc).

What is the most efficient way to transfer the equity in the home to myself? Him selling it, hence liable to CGT (since its his second home), or gifting to me, then me selling it (no CGT because its been my main residence for 3 years)?

I thank you gracefully for any replies.

[bd6759]

Your father would be liable to CGT whether he gifts it or sells it. CGT applies when an an assets is disposed of, whether by sale, gift or otherwise

[ubereano]

Ok thank you, very clear.

Am i right in thinking that if he was to gift the property to me at the lower end of the valuation, say £200,000 (then he would subsequently pay his share of CGT), but would there be any time requirements for me to sell the property CGT free? Since it has been my main residence for 3 years, even if i have only owned it for lets say a couple of months. I.e. Would I still be liable for capital gains if i I sold it soon after getting it gifting to me since i haven't owned the property for very long?

Thank you once again

[LozaACCS]

As stated, it matters not whether the property is sold or gifted to you, the transaction will be between connected persons so the provisions of S286 TCGA 1992 apply, this means all transactions are treated as taking place at market value, there would not be a possibility of the donors CGT being reduced by an under valuation.
If it were gifted the resulting CGT liability could be deferred for up to 10 years by making an election under section 281 to pay the liability in ten interest bearing annual instalments.

[ubereano]

Sorry im having trouble finding info about this online, but, to confirm, there is no time limit needed for me to stay in the flat for it to be sold CGT free?

If it was valued at £200k once transferred to me, i could theoretically sell it for £230k soon after (property in the area is going at a premium to the valuations at present) with no capital gains? Since it is my only residence.

Sorry for repeating, but thank you kindly for any assistance.

[SteLacca]

Provided it is your principal private residence during the period that you own it then you will not have a capital gains tax charge. If you move out such that the whole gain doesn't qualify for private residence relief, the period prior to you owning in does not count for the purpose of calculating the apportioned relief.

[bd6759]

There is no minimum period, but it has to be your residence. "Residence" doesn't mean living in it for a short period in order to get the PPR exemption. It means living with the intention that it shall be your residence. The term "residence" implies a degree of occupation for an indeterminate period.