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Where Taxpayers and Advisers Meet

CGT on gift of house

timtom
Posts: 4
Joined: Thu Feb 05, 2009 10:29 pm

CGT on gift of house

Postby timtom » Fri Mar 06, 2020 12:04 pm

Hi, my mother gifted her daughter her house about 10 years ago, value now is approx £300000. My mother still lives in the house and she has no other assets, the house is to be sold on mother's death and proceeds divided equally to all 4 children and partners, 8 in total. Sister has not lived in the house for 40 years, has her own house with her husband. What is the best course of action to lessen the cost of CGT? Is it possible for sister to divide ownership of the house to each sibling and partner?
All parties are amicable and only want to lessen the CGT payable.
Regards Tim Patrick

maths
Posts: 7893
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT on gift of house

Postby maths » Fri Mar 06, 2020 5:02 pm

Gifts to non-spouse/non-civil partner will give rise to a CGT charge prior to any sale by all parties.

Possible use of a discretionary trust may mitigate CGT on an eventual sale.

AGoodman
Posts: 1029
Joined: Fri May 16, 2014 3:47 pm

Re: CGT on gift of house

Postby AGoodman » Fri Mar 06, 2020 5:05 pm

Not really much you can do. It's a shame she made the gift - not least because it won't achieve anything for IHT. What was the rationale?

If there is any documentation that the daughter holds for all the children then you might be able to do something but if the daughter is clearly the beneficial owner, it's unfortunate.

In theory daughter could make a gift of 7/8ths to a trust for the 7 other beneficiaries, claim holdover, at some point in the future distribute the house and claim holdover again. All sell and use their respective annual exemptions. That will require some proper advice, planning and time and is a little aggressive if you try to do it quickly.

maths
Posts: 7893
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT on gift of house

Postby maths » Fri Mar 06, 2020 5:55 pm

In theory daughter could make a gift of 7/8ths to a trust for the 7 other beneficiaries, claim holdover, at some point in the future distribute the house and claim holdover again. All sell and use their respective annual exemptions. That will require some proper advice, planning and time and is a little aggressive if you try to do it quickly.
Took the words right out of my mouth!

Or gift 6/8ths and gifting 1/8th to current spouse/civil partner; otherwise no hold-over as trust would settlor interested (assume daughter is married/civil partner).

timtom
Posts: 4
Joined: Thu Feb 05, 2009 10:29 pm

Re: CGT on gift of house

Postby timtom » Fri Mar 06, 2020 6:51 pm

Many thanks to you both. I am not sure of the rationale for the gift. I will advise my sister to look into the trust idea. There is no great rush as mum is still going strong, I thought it best to ask as early as possible.
Regards Tim

maths
Posts: 7893
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT on gift of house

Postby maths » Fri Mar 06, 2020 7:22 pm

Daughter could gift 6/8ths of property to discretionary trust.

Claim CGT hold-over.

Mother included as discretionary beneficiary. Trustees appoint house out to mother.

Mother leaves her 6/8ths interest in her will and any gain is wiped out. House already in mother's estate for IHT so IHT position remains the same.


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