Capital gains - help needed

sukysuncap

Hi
Can anyone help me. Our family home was signed over to the 3 children about 10 years ago. It has just been sold for 240000. This will be divided between the 3 of us. Can anyone help with how much capital gains we will have to pay. About five years ago we lived in the house for 7months. Does that make any difference?
Thanks in advance.

johnllew

Has it been let whilst in your ownership?

sukysuncap

Thank you very much for your replies. The house has never been rented.
My husband and I lived in the house with his mum for 7 months. We had sold our house and the house we were moving in to wasn't ready.

silvercar

Sounds a good enough reason. If you registered that address with your employer / credit cards etc it all adds evidence. Also, if his Mum had been claiming single person council tax discount and your presence there meant she cancelled the discount for that time, that is even more evidence.

Presuming the revenue accepts that time period, you would gain PPR relief for 7 months + 36 months as a fraction of the total gain. So your gain drops by a third (roughly speaking).

Your siblings, if they haven't lived there as their PPR would not have this relief and so would have a potentially larger CGT bill. This doesn't matter as you all would individually declare your gains on your own tax returns.

(Too late now, but your spouse could have passed half his share to you prior to sale. You would then have been able to use your own CGT allowance of £9,600 if not used elsewhere.)

Following on from Jimmo's comments, you now need a valuation of the property at the time ownership passed to the children. Local papers (with house price ads) are often available in libraries going back years. Accepting Jimmo's assertion that you will need a professional valuation, a starting point would be to estimate the value and then discount it for the presence of your parents. There are actuarial tables that can do this, but a starting point would be to knock a third to a half of its value, presuming your parents were ageing but in relatively good health.

sukysuncap

Thanks so much for your help and advice!
Since 5.45 today everything has changed. The buyer has backed out. Back to the drawing board. Is it too late now for my spouse to sign over half his share to me? The house is still on the market.
Thanks again

silvercar

The transfer would need to be done before exchange of contracts on the sale, so it isn't too late.

Calculate the benefit before you go ahead. The costs would be approx £2-400 for a solicitor to do the legal work. If there is no mortgage on the property you could possibly do the work yourselves, contact the land registry for the forms and advice. The benefit would be a second CGT allowance of £9,600. With CGT taxed at 18%, that is £1,728. You only make the full gain if your other half's capital gain would be over £19,200 without the transfer.

Just a thought, if all the siblings have spouses (and it needs to be spouses not un-married partners), I recall some restriction on how many people can be registered owners of a property. 4 springs to mind.

silvercar

Using the house price inflation calculator here:

http://www.nationwide.co.uk/hpi/

(and you could do better by using the post code rather than "UK general")

the house could have been worth around £80k ten years ago. If we devalue that to £55k to allow for the parents living there rent free, the total gain is £185k, knocking off £5k for transferring and selling expenses is £180k which would be £60k each sibling.

PPR relief for the time you lived there and the last 3 years of ownership reduces that £60k to about £38k.

With one lot of CGT allowance the gain becomes £28.4k; with 2 lots it drops to £18.8.

All very approximate.

sukysuncap

Thanks again! Everyone who replied has been so helpful.

Myrmidon_J

Two cents:

http://www.hmrc.gov.uk/helpsheets/hs283.pdf

This is the HMRC 'help sheet' on private residence relief. I think it overcomplicates the matter somewhat (typical), but there is some useful information included.

Good luck!

silvercar

Hi Jimmo, in this case the husband and wife both lived in the property for 7 months. So if the husband transfers a share to the wife which allows the transferee to acquire the transferor’s accumulated qualifying period of ownership, the wife will have had some time living there as PPR while owning a share? Yes/no?