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Where Taxpayers and Advisers Meet

CGT- Help

Dev_1
Posts: 51
Joined: Sun Jun 18, 2017 4:00 pm

CGT- Help

Postby Dev_1 » Sat Mar 07, 2020 3:04 pm

Hello,

First of all I appreciate all the help people have given in relation to my position i am just trying to figure everything out with the figures i now have which are final.

1: - Property purchase price £72,000 (1986) My mother & father
2: - Probate value of property £250,000 as of (2007) passed to mother
3: - Mother gifts 50% share of property to son in 2010 (Both mother & son continue to live at the property)
4: - Both mother and son move out of the property in 2016 and property become buy to let
5: - Mother wishes to transfer remaining 50% to son i.e me making me 100% owner - Value of whole property as of Feb 2020 confirmed at £550,000. Value of mother 50% share which she is planning on transferring to son given as £233,000 by surveyor.

please can someone confirm if the calculations below is correct for my mothers CGT calculation

1: - Half of original purchase price =£36,000- Half of £72,000 (1986)
2: - Half of inherited share as of probate £125,000 - Half of £250,000 (2006)
Base costs = £161,000

3: - Transfer of remaining 50% share (£233,000) by mother to son in 2020 - Base cost = £72,000

4: - Gain of £72,000 x 360 Months (Occupation for PPR) DIVIDED by 396 months (Ownership for PPR) = PPR relief of £65,454

5: - Gain after PPR relief = £6,546

6: - Letting relief covers gain of £6,546

= No CGT to pay

if someone is able to confirm the above i would be so grateful.

Many thanks

maths
Posts: 7894
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT- Help

Postby maths » Sat Mar 07, 2020 7:06 pm

Ownership by mother (M): 34 years [1986 to 2020]

Occupation by M 30 years [1986 to 2016]

Letting period 4 years [2016 to 2020]

Base cost of 50% gifted to son in 2010: [36,000 plus 125,000]/2 = 80,000 (say).
Remaining 50% has base cost of 80,000.

Gift in 2020 of 50% has base cost of 80,000 and market value 233,000.

Gain = [233,000 - 80,000] = 153,000.
Private residence relief : 153,000 x [31.5/34] = 141,750
Lettings Relief: 153,000 x [2.5/34] = 11,250
Annual exempt amount = 12,000

Chargeable gain = 153,000 - [141,750 + 11,250 + 12,000] = NIL

NOTES
1. Last 18 months of ownership treated as occupation period [30 + 1.5 = 31.5]
2. Lettings Relief based on letting period 4 years less above 1.5 ie 2.5.
3. Assumes gift made on or before 5 April 2020. Thereafter above 1.5 years reduced to 0.75 years and Lettings Relief will be nil.

Thus if gift made on or after 6 April 2020 the Chargeable gain becomes = 153,000 - [141,750 + 12,500] = NIL.

Dev_1
Posts: 51
Joined: Sun Jun 18, 2017 4:00 pm

Re: CGT- Help

Postby Dev_1 » Sat Mar 07, 2020 8:19 pm

Hi Maths,

I really can’t thank you enough you are a star.

Just to confirm the first gift of 50% in 2010 to son (me).
Would we need to determine the value of the property at that point i.e the 50% value of what was gifted to me and in fact the value of the entire property or would you say that would not be relevant for calculating the transfer of the remaining 50% now I.e 2020 from mother to son?.

Sorry once again & thank you so much.

Regards

maths
Posts: 7894
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT- Help

Postby maths » Sun Mar 08, 2020 5:24 pm

Gift of 50% in 2010 was a CGT disposal for mother but as she lived in it then no CGT charge arose at that time irrespective of valuations.

However, it is of relevance to son. As and when son sells the 100% he will eventually own, his base cost will be the value of 50% in 2010 plus value of 50% acquired in 2020.

Dev_1
Posts: 51
Joined: Sun Jun 18, 2017 4:00 pm

Re: CGT- Help

Postby Dev_1 » Mon Mar 09, 2020 7:05 pm

Hi Maths,

You are a true gentleman, thank you. Your assistance is very much appreciated.

I am sure this does not concern us but would stamp duty be an issue.

It’s a gift, a buy to let, no money exchanging hands, no mortgage?.

Thanks

maths
Posts: 7894
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT- Help

Postby maths » Mon Mar 09, 2020 7:50 pm

No SDLT as there is no consideration re a gift and no assumption of debt re any mortgage.


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