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Where Taxpayers and Advisers Meet

Capital Gains Due on Gift to Son

Geoff11
Posts:4
Joined:Sun Oct 24, 2021 10:45 pm
Capital Gains Due on Gift to Son

Postby Geoff11 » Sun Oct 24, 2021 11:06 pm

Hoping someone could provide a bit of clarity on a unique scenario.
Father A buys a house in 1975, for 5k. Not his primary residence. The house is worth in 2018 200k. Through out that time he’s spent 30k max in all costs relating to repairs/purchasing the property etc. In 2018, he gifts the property to his daughter for nil consideration and his Daughter is legal owner and proprietor as of 2018. In 2018 this is still not his primary residence. Father A then dies in 2020, approx 18 months after gifting the property. As I understand it, Father A should have declared the gift on his 2018/2019 self assessment and settled the tax by 31/01/2020, but also as he’s died within 7 years of gifting then Inheritance tax is also due now. Using the rough numbers I have given:

1. How much CGT would Father A have to pay for transferring the property to his daughter?

2. How much further tax would be liable in IHT due to his death in 2020?

3.Would the Estate of Father A only be responsible for the debt if it hadn’t been settled or declared? Or does The daughter hold some liability?

4. If the daughter got into financial difficulties and tried to sell the house to another ‘connected’ person in the family for 15% of todays market value (say the house is now worth 280k), ( 42k )as I understand it she also would have declare/pay the Capital Gain she’s enjoyed in the last 3 years. Her expenses for the last 3 years has been insurance and legal costs to transfer the property so let’s say 5k max.

Any advice would be greatly appreciated

Geoff11
Posts:4
Joined:Sun Oct 24, 2021 10:45 pm

Re: Capital Gains Due on Gift to Son

Postby Geoff11 » Mon Oct 25, 2021 11:02 am

Title should read: Capital Gains Due on Gift to Daughter

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Capital Gains Due on Gift to Son

Postby AGoodman » Thu Oct 28, 2021 2:44 pm

1. Tax at 18% or 28% on the gain. The gain would be £195,000 minus transaction costs and cost of improvements (not repair)
2. Probably nothing. The first £325k of gifts are covered by father's nil rate band. This would increase the IHT on his estate as £200k of the nil rate band would not be available.
3. See 2 - there is unlikely to be tax on the gift
4. Yes, she would pay CGT calculated on market values . Insurance is not an improvement so cannot be deducted

Geoff11
Posts:4
Joined:Sun Oct 24, 2021 10:45 pm

Re: Capital Gains Due on Gift to Son

Postby Geoff11 » Thu Oct 28, 2021 4:18 pm

Thank you very much for your reply AGoodman.

1. The house valuation would on the basis of the market value of that property on the 31 March 1982 I understand, and not the price paid in 1975. Would you understand that to be correct also?
2. The father has his main property shared with his wife, which is worth approx 230K. This additional property was in the fathers name only, and is worth approx 200K at the point of gifting. Would IHT only be paid if it was over 325K, which half of his martial home, and his additional property would push him very close to, or is he allowed to use both him and his wives combined amount (650K)
3. If, say for example the CGT tax wasnt never declared to HMRC post gift ( I dont think my question was specfic enough originally), Could HMRC come after the daughter for the CGT that was never paid?
4. Noted, so only legal costs could be deducted, not insurance. Thank you for clarifying.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Capital Gains Due on Gift to Son

Postby bd6759 » Sat Oct 30, 2021 11:27 am

1. Yes. Only gains accrued from March 1982 are chargeable.

2. Father's IHT allowance only, based on his share of joint assets.

3. Any unpaid tax is a debt of the estate.

Geoff11
Posts:4
Joined:Sun Oct 24, 2021 10:45 pm

Re: Capital Gains Due on Gift to Son

Postby Geoff11 » Sat Oct 30, 2021 12:36 pm

Many thanks for your reply bd6759. Understood.


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