CGT versus IHT???

farahcottier · 21 February 2005 at 9:09PM

Hi

I wonder if anyone can give me any input for the following scenario? My mother owns a large victorian house that has been converted into 4 self contained flats.

A sitting tenant resides in one flat.
My mother lives in one flat.
The remainining two flats are rented out to tenants.

3 of the flats have been declared as an investment/commercial property.The property was bought for £30000 and is now worth £650000.

Her intention is to gift this property in its entirety to myself and my 2 sisters in the form of a PET. Would this be the most beneficial way of cutting tax? Is she liable for CGT in this instance?

A friend who is an accountant has suggested that it would be more sensible for my mother to retain this property in her name and leave it to us in her will. An IHT insurance should be taken out in the event of her death to pay for any IHT incurred.

Any feedback would be appreciated!

Thanks

Paul_Varjak · 22 February 2005 at 5:37PM

I would suggest going to see a financial advisor. You are talking about a lot of money and really need expert advice.

I do not think it is something that could be reasonably answered on this site by any financial advisor who may contribute to this site - without possibly falling foul of certain rules and procedures.

For the non-experts who may contribute to this site, I would be worried about relying on their advice.

Rafter · 22 February 2005 at 5:40PM

Farah,

I think it would be possible to gift it or getting some rollover relief into a trust split 3 ways. However, you need to be careful not to trigger avoidance rules and your mother would have to pay a commercial rent for the property.

As long as your mother lives for 7 years no inheritance tax will be payable.

CGT should only crystalise (ie become payable) if and when the property is sold.

My other observation is that selling the property at some later date will be really difficult if it is still one unit with 3 joint owners.

I strongly recommend you find an accountant who is an expert in property, trusts and inheritance who can advise you about the best way to proceed.

Taking out an expensive IHT insurance policy may not be the best option and will become more and more expensive as you mother gets older.

Good luck.

R.

CGT versus IHT???

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free