Slightly complex tax issue

Marwanie

"If they are reluctant to pay CGT, then I think one option available is to give the property to a trust, which could defer CGT."

I have heard about this a few times now in my research, would anyone be so kind to link me to some more information about it?

Thanks for all the help!

localhero

The point I was making about considering a lifetime trust instead of a gift to the children directly or a sale, is that CGT can be deferred.

As Jimmo says that will not reduce the liability in any way, but is a possible route to removing a property from the estate for IHT purposes, but not being forced to sell assets (including the house itself) immediately to pay the CGT bill.

I would also agree with Jimmo that we really need more information as there will also be IHT to consider.

silvercar

Marwanie wrote: »

She bought the house in '87 for £20k (although she lived there previously but it was rented then I believe) , and moved out in '93. Ever since it has been rented out with five tennants. If there is anything else you need just ask and I'll find out. :-)

From Jimmo's comments on price increase since 1987, I'm guessing that she bought it at a reduced price from someone in the family? Maybe she bought it with a tenant already living in it (whether paying rent or not).

More questions to try and make things clearer. When did your parents get married? Did your mother ever live in the property, as her principle residence, at any time since she bought it?

Marwanie

Hi

My parents are married, and they lived in the house for 6 years when they were married.

Also, she bought it as a tennant for a reduced price and she knew the her landlord fairly well so I think she got a decent discount.

Combined my parents houses are probably worth about £800k (both with mortgages fully paid off) so it will go over the £625k IHT limit.

silvercar

More questions:

When did your mother buy the property?

When did she move in and when did she move out?

Was she married at this time and if so, dod your parents live in it together or did they have another home elsewhere?

If she actually lived in it as her main home during her period of ownership, then there will be some CGT relief available along with letting relief.

harryhound

I think there is such a gulf of understanding between the OP and those in the know who are trying to help, that the first step needs to be an explanation of CGT - what it is and how it works.
Followed by a similar explanation for IHT.
Then an explanation of how these two taxes Capital Gains Tax & InHeritance Tax interact.
Only then will "Letting Relief" etc. start to make sense.
This is a classic example of "If you are not pretty confused you obviously have not begun to understand the explanation".

Would emigrating to somewhere tax free (Dubai?) and then selling the damned properties from there do the trick?

harryhound

A cousin of mine managed to do the emigration trick by moving to S.Africa, but that was about 15 years ago.