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Where Taxpayers and Advisers Meet

Gifting residential property resulting in 5 owners

trainline
Posts:17
Joined:Sat Oct 02, 2021 4:25 pm
Gifting residential property resulting in 5 owners

Postby trainline » Thu Jan 13, 2022 10:43 am

Two relatives with whom my wife and I co-own a second home (which none of us have ever lived in) have decided to give their share to our 3 children by deed of gift. As this results in 5 owners, their solicitor proposes only two of the three are added to the deeds. The property has in the last year benefitted from planning permission for a further property to be build on the garden plot. Our intention is to sell the property this year with benefit of the planning permission.
My query is twofold:
1. Setting the market value at the time of the gift. My understanding is that if the value is set too low without taking account of the uplift in value, the giftees will pay CGT on the difference at the time of sale (and HMRC could take issue with a low valuation at the time of the gift). It shouldn't make any difference to my wife and I as our acquisition cost is based on the original value at the time of my purchase of the property (a value which my wife also 'inherited' when I gifted her a share a couple of years ago). But if the property ends up selling for less that today's stated market value, would that cause issues with HMRC when the CG is declared?
2. With three giftees in the Deed of Gift but only two on the deeds, would there be any additional tax implication, for example a deemed gift from the two on the deeds to the third that isn't?

Thanks
T

AGoodman
Posts:1420
Joined:Fri May 16, 2014 3:47 pm

Re: Gifting residential property resulting in 5 owners

Postby AGoodman » Thu Jan 13, 2022 11:20 am

1. The gift is deemed to take place at the market value for tax purposes, which should take into account the planning permission. If you ended up selling for less than the declared value, your children would make a loss (which they may not be able to use). I don't see that HMRC would be concerned, they have done very well out of the valuation.

2. The third child would still be a 1/6 owner from the date of the gift ( being 1/2 * 1/3). Only four people can be on the legal title but this should be supported by a simple trust deed in which the four declare/confirm that they are holding the property for all five in their respective shares. Tax follows the beneficial, rather than legal, ownership.


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