tax on gifted holiday home

[Toni Riga]

I am trying to understand the tax liability on a holiday home in Italy. I am UK domiciled and tax resident. The property was gifted to me in 2014 by my parents both Italian nationals and UK (scotland) tax residents since the 1950's. It was gifted with a reservation of benefit (usofruct or usofrutto in Italian.) However in reality my parents never used the house for more than a couple of weeks a year up until 2016 and then never returned due to ill health. I also maintained the property and paid local taxes at my expense. We are now in the process of removing the usofruct so that I have full title and use of the property. Mainly because having my father as usofruct causes me local issues with bills. I have no intention to sell. What I would like to understand is
.
1 I believe I have a case to back date for the purposes for PET to 2014 as my parents never materially used the property and I ended up paying expenses anyway.
2 now that I am about to remove the usofruct I think we raise a CGT liability.

Any comments or advice welcome.
Toni

[jerome.lane]

Not withstanding any Trust or tax advice that may have been provided at the time (I'm assuming none in the UK), I would have thought that a CGT liability should have arose in 2014 when you were gifted the property. you became he legal owner but your parents retained a right to enjoy the property which prevented you from being able to sell it. Your parents should have paid CGT on any gain back then.
The 7 years for IHT purposes runs from when the reservation is lifted and it will be difficult to argue otherwise and at best probably only back to 2016 when they stopped using it.
you will only have a CGT liability when you sell the property.
It's probably worth getting some estate planning or tax advice for your parents just to see what the potnetial issues might be.