Shared Ownership Property Sale

[Hills]

My mother-in-law, widowed in 1995, purchased a new property in her sole name in November 1997. In 2003, the property was transferred into three names of the mother and her two only children, as Tenants in Common in equal shares. The property continued as the mother’s main residence. The children did not reside at the property, with one residing abroad and is a non-UK tax resident for the last 20+ years. The mother now wishes to move into a nursing care home, selling the property as part of that transition.

What would the potential tax liability be for each individual registered owner on the property sale, e.g. CGT?

Does GWRB apply and if so, what is the effect on the property sale?

Assuming the property sale completes with CGT? (taxes?) paid by the relevant individual on their share of the sale transaction, then in terms of the remaining IHT exposure upon the mother’s subsequent demise, what would the estate liability be?
The estate, using the current full property value (not just 1/3rd share value) currently would not exceed the present IHT allowance limits. Indeed, after the property sale it would be remain below having been reduced by paying for her ongoing nursing home care. In addition, is it correct that the mother’s estate could benefit from any unused portion of IHT allowance falling from her deceased husband’s estate, she being the sole beneficiary of that estate back in 1995, if it were needed?
Are there any other tax implications of selling the property now which need to be considered?
Your thoughts would be gratefully appreciated. Thank you.

[someone]

Each individual is liable to CGT on their gain of their share from date of acquisition. Their gain is (value at sale less costs - value at acquisition) * 1/3. Sounds like the MiL will get full PPR so no tax due for her, only for the children.

From what you say about the total value of the estate, it doesn't sound like there's any issue with a GWRoB as the estate falls inside the IHT allowance. But unless she lives another 7 years then the whole value of the property will fall into the estate for IHT purposes.

Don't forget the 60 day CGT stuff - the penalties for failing to do that can exceed the tax due! The non-UK resident needs to do it even if there is no tax due once you've done the calculations.

[Hills]

Thanks ‘someone’ for summarising the impact.

As you raise the IHT 7 year survival rule being a consideration to be aware of, if the whole property value ends up being included in the estate then a clarification please is the part about –

“ In addition, is it correct that the mother’s estate could benefit from any unused portion of IHT allowance falling from her deceased husband’s estate, she being the sole beneficiary of that estate back in 1995, if it were needed?

Many thanks

[AGoodman]

Yes, the mother's estate could use the transferable nil rate band in the event it was needed to cover the GROB. I think she should also be able to use the residential nil rate band and transferable nil rate band on the basis she has previously owned a home but gave it to her descendants.

On the CGT, the non-resident child should only have to pay CGT on the gain since April 2015. They can elect (in the NRCGT return) to do that in two ways:

- get a market value of the property as per April 2015 and pay tax on the gain over that value
- apply a straight-line basis - i.e. assume the property has risen in value on a constant basis between 2003 and 2026 and so approx 11/23rds of the gain since 2003 would be subject to tax. You would need to work out the value in 2003 but the resident child would need that anyway.

[Hills]

Thanks AGoodman

Most helpful. Many thanks.