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Where Taxpayers and Advisers Meet

CGT on part inherited / part owned property?

dwb
Posts:2
Joined:Mon Aug 20, 2012 1:56 pm
CGT on part inherited / part owned property?

Postby dwb » Mon Aug 20, 2012 2:02 pm

Hi All

Newbie to the forum. Looks very good.

Have question regarding CGT liability that I cant seem to get a clear view on (probably just me :-)).

- My wife and I bought a half share in a house with my Dad owning the other half in Sept 2001. The house was purchased at £122k.
- My Dad lived there until Sept 2008 when he passed away. At the time of his will the house was valued at £215k and his will left his half to my wife and I.
- We rented the house out until April 2012.
- We are now in process of selling ot for £206k.

Any thoughts would be greatly appreciated.

Many thanks
Derek

pqtaxation
Posts:353
Joined:Wed Aug 06, 2008 3:38 pm

Re: CGT on part inherited / part owned property?

Postby pqtaxation » Mon Aug 20, 2012 3:44 pm

My indicative thoughts (on your incomplete information and my presumptions) are:

As your wife and/or you have never lived in house you are not eligible for main residence relief (PPR) or lettings relief.

Each of your wife’s and your 25% interest purchased in 1982 would have a base cost of £30.5k (=£122/4 ) before allowable acquisition costs.

Each of your wife’s and your 25% additional interest inherited from your father in 2008 would normally have a base cost of ½ of (his probate) value from his IHT account (presumably = 215/4 less 10% or 15% discount) – say £48k.

Presumably father paid for any improvements until his death.
Presumably you have paid for any capital improvements after his death.
Presumably you have shared net rental income 50/50 on your respective tax returns.

So if you sell entire house for £206k gross -or say £201k after allowable sales agent and legal costs that is £100.5k for each 50% interest against a base cost for that interest of say £80k.

So that’s a gross gain for each of you of say £20.5k and subtracting annual exempt amount of £10.6k would a taxable gain of around £10k each and CGT payable of £1,800 at 18% or more if at 28% but higher rate you might be able to adjust by deed relative beneficial interests of each spouse depending on where sale is in sales process.

pqtaxation
Posts:353
Joined:Wed Aug 06, 2008 3:38 pm

Re: CGT on part inherited / part owned property?

Postby pqtaxation » Mon Aug 20, 2012 3:47 pm

... Each of your wife’s and your 25% interest purchased in 1982 would have a base cost of £30.5k (=£122/4 ) before allowable acquisition costs.
Sorry you purchased in 2001, so correct my reference to 1982 to read 2001

dwb
Posts:2
Joined:Mon Aug 20, 2012 1:56 pm

Re: CGT on part inherited / part owned property?

Postby dwb » Mon Aug 20, 2012 4:23 pm

Many thanks pq.

Quick question. Where you say "presumably = 215/4 less 10% or 15% discount" - what is the 10% or 15% discount for?

Will check out deed relative beneficial interests

Thanks again!

Derek

pqtaxation
Posts:353
Joined:Wed Aug 06, 2008 3:38 pm

Re: CGT on part inherited / part owned property?

Postby pqtaxation » Mon Aug 20, 2012 5:36 pm

1) Quick question. Where you say "presumably = 215/4 less 10% or 15% discount" - what is the 10% or 15% discount for?

2) Will check out deed relative beneficial interests
1) See another recent thread for a simple introduction to that discount

http://www.taxationweb.co.uk/forum/iht- ... 39043.html

That recent thread concerns the value of a 50% interest in a flat to be entered on a deceased father’s IHT account. In your case I only mentioned the discount so as to get an approximate figure to include in an illustrative computation for you and your wife's circumstances.

But in fact you presumably have access to your father’s IHT account and probate/estate papers to see the actual value put on his 50% interest in the house in 2008. Presumably his estate was not IHT paying and so that value was never agreed by HMRC (“ascertained” is the technical term). If so, you can argue to use on CG34 a different (higher) base cost in your CGT computation in the unlikely case that there is an obvious reason(s) that the value from your father’s 2008 IHT account was in error.

2) I should have written deed to change relative beneficial interests of spouses- if one otherwise would pay CGT at 18% and the other at higher rate.


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