CGT on mother in laws house

TBC15

Approximately 8 years ago following a divorce my mother in law found herself homeless.My wife and I bought her a house to live in. in my wife’s name.
We have our own home in joint names. When we come to sell the house we bought for the mother in law what will our capital gains tax liability be, and is there anything we can do to minimise liability.

We live in Scotland my wife is 55 I am 50 and work overseas and do not pay UK income tax.

fengirl_2

If you are not liable to UK income tax then you are not liable to CGT either.

ceeforcat

It appears to me that it is only the poster who is not liable to UK tax - (I am 50 and work overseas). Also the house in in his wife's name. If this is so, can we have some figures? If not, ignore this post.

Cost of property, capital improvement costs, value now etc..

TBC15

Fengirl – is there any way I can change the ownership of the house to my name?

Ceeforcat- The house was bought for £40,000 has had about £6000 spent on bathroom kitchen etc and is currently worth about £75000

fengirl_2

Yes, your wife can transfer the house to you with no CGT liability. Sorry I misread your original post - I thought you were both non-resident.

TBC15

Would we have to pay stamp duty if ownership was changed to my name?

bryanb

TBC15 wrote: »

Would we have to pay stamp duty if ownership was changed to my name?

Surely it's below stamp duty threshold?

ceeforcat

I would strongly not advise to transfer the house to your sole name or carry out any other transaction which would have the sole purpose of avoiding tax i.e. not for business reasons. HMRC will jump on this and, if they do not consider penalties, will at the very least regard the transaction as null and void.

As it is, based on figures provided and assuming your mother in law does not pay a full rent, your wife’s CGT liability will be c£3420.

TBC15

Any problems/ advantages putting it in joint names? Which doesn’t seem unreasonable as the money that originally bought it came out of a joint account.

The mother in law doesn’t pay any rent

John_Pierpoint

This situation of dependent parent (they were obviously dependent because they were getting free use of your house) used to be free of CGT. BUT the rules were changed more than 8 years ago, in 1988 I think.

However if other households have such a situation set up years ago - they might still qualify.

ceeforcat

I think John is talking about dependant relative relief but the relative had to be occupying the property in 1988 when it was abolished.

With regard to transferring the property into joint names – why would you be doing this? The answer is surely to avoid tax and for no other reason. There may be some possibility that you could argue otherwise if the transfer and sale had a reasonable gap of, say, a year to eighteen months – ultimately your decision.