Taxation on no-money transfer of house shares

[bruno61]

Twelve years ago, my wife and I helped our son buy a small house. The purchase was outright, i.e. no mortgage, and the three of use agreed equal one-third shares as tenants in common. Our son has been continuous and sole resident. He pays his bills, but he has paid us no rent or anything else. We have paid for various improvements. By now, the house has approximately doubled in monetary value. We are reaching the end of our lives and wish to transfer our two one-third shares in the house to our son, at no cost to him, so that he becomes sole owner. So: we contributed substantially to the purchase; never lived in the house; have earned nothing from it; and will gain nothing on the transfer of our shares. What will be our position with respect to IHT and CGT?

[AGoodman]

CGT: You will each make a disposal for CGT - where your respective gains would be 1/3 of the current market value minus (a) 1/3 of the acquisition price (b) 1/3 of the SDLT/legal fees (c) any capital improvements you have paid for and a £3,000 annual exemption. That net gain is subject to tax at 18% (basic rate), 24% (higher rate) or a blend of the two if the gain takes one of you over the higher rate threshold.

Capital improvements don't include repairs - an improvement means better than the original position (i.e. not repainting, new carpets or new roof, but would include an extension or additional bathroom)

If there is tax to pay, you would each need to file an online CGT return within 60 days of the transfer.

IHT: You would each make a potentially exempt transfer (PET) of your respective 1/3 shares at market value. That value would remain in your estates for IHT purposes until you survive the gift by 7 years. Taper is unlikely to apply unless each share is worth over £325k.

[bruno61]

Thank you for your kind reply. Your account confirms what we had thought was the situation. So we plan to obtain a realistic valuation, then deal with the Land Registry and HMRC. Presumably a standard estate agent valuation will not do. Many thanks again.