BTL Tax part ownership transfer
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Biggie
Posts: 370 Forumite
Background:
My self and my father have a shared BTL flat. I earn majority share however my father wishes to gift 1/2 he’s share to myself and I buy out the remaining he owes.
Any flaw in my plan:
Total gain= (%owned x current Valuation) - (original deposit + improvement costs)
Tax due - (assuming no gains for the year)
My father Pays tax on capital gain on the portion I wish to purchase.
Tax due = (Capital Gain allowance - (50% x Total Gain)) x 18%
Amount gifted to me (for me to declare on my return)
= (%owned x current Valuation) + Original Deposit
Now on this gifted amount can I defer this payment until flat is sold.
What needs to be done to put this into action
- Title deeds to be changed to reflect change in ownership
- fathers return to show he’s portion sold and pay tax bill above
- my return declare gift on amount above
My self and my father have a shared BTL flat. I earn majority share however my father wishes to gift 1/2 he’s share to myself and I buy out the remaining he owes.
Any flaw in my plan:
Total gain= (%owned x current Valuation) - (original deposit + improvement costs)
Tax due - (assuming no gains for the year)
My father Pays tax on capital gain on the portion I wish to purchase.
Tax due = (Capital Gain allowance - (50% x Total Gain)) x 18%
Amount gifted to me (for me to declare on my return)
= (%owned x current Valuation) + Original Deposit
Now on this gifted amount can I defer this payment until flat is sold.
What needs to be done to put this into action
- Title deeds to be changed to reflect change in ownership
- fathers return to show he’s portion sold and pay tax bill above
- my return declare gift on amount above
0
Comments
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you seem to have missed the fact that your father cannot gift you his share without he himself incurring CGT on that gift - that is a key fact of CGT when gifting between "connected persons" designed to ensure that market value is the basis of the tax calculation not that fact that it was a free gift
your father will be liable for the gain on his gifted portion in just the same way as he will be liable for the gain he has made on the portion you buy0 -
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm
See Capital Gains Tax on a home you give away and Inheritance Tax when passing on property
http://www.hmrc.gov.uk/cgt/intro/basics.htm0 -
you seem to have missed the fact that your father cannot gift you his share without he himself incurring CGT on that gift - that is a key fact of CGT when gifting between "connected persons" designed to ensure that market value is the basis of the tax calculation not that fact that it was a free gift
your father will be liable for the gain on his gifted portion in just the same way as he will be liable for the gain he has made on the portion you buy
No I understand that but I remember reading somewhere that there's special case for gifting property where the tax liability can be deferred until property is sold. Though I can't find any reference to it now.0 -
something like this.
Hold over relief
http://www.hmrc.gov.uk/cgt/property/reliefs.htm#2
So I'm wondering if I can do this on the portion gifted to me and my father pays CGT that he receives cash for. Is that possible ?0 -
absolutely notsomething like this.
Hold over relief
http://www.hmrc.gov.uk/cgt/property/reliefs.htm#2
So I'm wondering if I can do this on the portion gifted to me and my father pays CGT that he receives cash for. Is that possible ?
the danger of plucking HMRC pages out of the ether is lack of context, you have missed a rather crucial word that comes before the whole section on hold over relief .... business
the asset subject to CGT must be a business asset which is being transferred from the existing business owner to a new owner.
I can understand why you are confused but a BTL residential property (held outside of a limited company structure) is not, and has never been, classed as a business asset for the purposes of CGT therefore hold over relief is not available. You simply cannot do it0 -
I think you may be also liable for stamp duty if the value of the share of ownership being transferred exceeds the SD thresholds.0
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stamp duty applies to the amount physically paid not the value of the item transferredSuperSaver123 wrote: »I think you may be also liable for stamp duty if the value of the share of ownership being transferred exceeds the SD thresholds.
the gifted share is therefore exempt from CGT as no "chargeable consideration" is exchanged
for the purchased share SDLT is applicable only if that sum of money paid is more than the nil rate threshold of £125,000.0
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