Capital Gains Tax

BIAGD

My 2 brothers and I loaned mother 15000 to buy council home in 2001 after living there since it was built. In 2005 she signed home to us and lived there paying only the utility bills until death last year. We have sold house but not completed until end next week. Once deductions for buying/improving house over the years have been done we should all net about 25000. CGT at present 18% on everything over 10100 allowance but as it has always been agreed that my portion would be split between me, husband and two children, can I do anything to ensure we pay less CGT (and thats without the new budget figures) and how would I do it? I have been told I could use ISA's and transferring half to husbands tax but dont know what to do. Its the only investment we are ever likely to be able to realise and it would be nice to get the most benefit to my family. I realise I can deduct my third to buy the house and costs for selling but unfortunately dont have the receipts for the home improvements!!

silvercar

CGT at present 18% on everything over 10100 allowance but as it has always been agreed that my portion would be split between me, husband and two children, can I do anything to ensure we pay less CGT (and thats without the new budget figures) and how would I do it?

You need to transfer your share of the property into the 4 names (you, husband and two children) before the sale. Make sure your solicitor understands that you want your share transferred before the sale and then the sale made, rather than each to receive their share of the proceeds of the sale.

If you've already exchanged it may be too late as the sale contract will already have been drawn up between you and the buyer; the sale contract needs to be between the four of you (and other owners) and the buyer.

00ec25

the net gain is £25,000, please confirm that this is the difference between between the value at date of transfer to you and the sale price
the house is currently owned by 3 people, you, brother 1 and brother 2?

the £10,100 allowance is per owner

therefore, before messing with transfers, why do you think you have any CGT to pay at all???

assuming the ownership is as tenants in common, with an equal share, then each person's CGT liability is 25,000/3 = 8,333. Clealry <10,100 each, so no CGT liability for any of you,
do however check what happens in the June budget because it is speculated the personal allowance will change

silvercar

we should all net about 25000.

I took that to mean 25k each. please confirm.

however check what happens in the June budget because it is speculated the personal allowance will change

I thought CGT worked on date of exchange not completion, so if exchange has already happened then current rules should apply.

crusty_toenail

BIAGD wrote: »

My 2 brothers and I loaned mother 15000 to buy council home in 2001 after living there since it was built. In 2005 she signed home to us and lived there paying only the utility bills until death last year. We have sold house but not completed until end next week. Once deductions for buying/improving house over the years have been done we should all net about 25000. CGT at present 18% on everything over 10100 allowance but as it has always been agreed that my portion would be split between me, husband and two children, can I do anything to ensure we pay less CGT (and thats without the new budget figures) and how would I do it? I have been told I could use ISA's and transferring half to husbands tax but dont know what to do. Its the only investment we are ever likely to be able to realise and it would be nice to get the most benefit to my family. I realise I can deduct my third to buy the house and costs for selling but unfortunately dont have the receipts for the home improvements!!

Hi there,

you will have no CGT to pay - in your special case there is a' loop hole', so refer to tax specialist who will fill in all the forms and send them to the HMCR on your behalf. You find out a couple of months after the forms are submitted. It is something to do with you owning the house when your mother still lived in it, which therefore meant you saved the state money by not having to house your mother. I know it sounds bizarre but we got out of paying cgt in exactly same situation as yours.

All the best,

Crusty.

BIAGD

silvercar wrote: »

I took that to mean 25k each. please confirm.



I thought CGT worked on date of exchange not completion, so if exchange has already happened then current rules should apply.

Yes, it will be 25K each and luckily the exchange has taken place (well in CGT subject - but not so lucky as we cannot now change the names to include my OH and children:()

Thank you very much all for your comments on this, I will be exploring all the avenues you mentioned.:)

silvercar

crusty_toenail wrote: »

Hi there,

you will have no CGT to pay - in your special case there is a' loop hole', so refer to tax specialist who will fill in all the forms and send them to the HMCR on your behalf. You find out a couple of months after the forms are submitted. It is something to do with you owning the house when your mother still lived in it, which therefore meant you saved the state money by not having to house your mother. I know it sounds bizarre but we got out of paying cgt in exactly same situation as yours.

All the best,

Crusty.

Dependent relative relief. It comes with conditions, see here:

"Residence provided for a dependent relative
In addition to the relief that may be due on disposal of your own residence, you may also be entitled to relief when you dispose of a residence which you have provided for a dependent relative. But you cannot get relief for:
• any residence acquired after 5 April 1988, or
• any residence acquired before that date unless the conditions for relief were met by that date.
The conditions for relief are:
• the dependent relative must occupy the dwelling house rent free and
without any other consideration
• only one dependant's dwelling house can qualify at any one time
• a husband and wife or civil partners who are living together can claim
relief for only one such dwelling house between them
• the dwelling house must be the sole residence of the dependent relative.

Who is a dependent relative?
Dependent relatives are:
• any relative of yours or your spouse or civil partner who is incapacitated
by old age or infirmity from maintaining himself or herself, or
• your own or your spouse’s or civil partner’s mother who, whether or not incapacitated, is either widowed, or living apart from her husband, or is a single woman in consequence of dissolution or annulment of marriage."

OP acquired a financial interest in the property in 2005 - too late to make use of the loophole.

BIAGD

Thanks for the update silvercar. You're right, that effectively closes the loophole for us. Just our luck!!!

BIAGD

Thanks to all who replied about this matter. The house is now sold and completed and we were presented with our share approx £25,000 each last week. The solicitor however, put a spanner in the works for me - he mentioned that if we had not claimed CGT relief last year (which we havent) we would be able to carry that forward to this year i.e. £10,100 x 2 then of course the normal deductions of house cost/sale etc. I havent seen anything on here to confirm that so does anyone know please?

00ec25

I think you have misunderstood your solicitor. The annual exempt amount of £10,100 is a one time only amount, you cannot carry forward unused amounts from previous years

what your solicitor is referring to is you can carryforward any losses you have previously registered in earlier tax years and then claim those earlier losses to reduce your gain down to the 10,100 limit (assuming your losses are big enough to do it)

the explanation is here on HMRC at step 6 point 5
a worked example using previous losses is here (it uses share sales but the principle is the same, you must have registered the losses in accordance with a timetable in order to be able to claim them in later years)

BIAGD

Thought it was too good to be true, I will consult the link you posted, many thanks.

What is this I hear about putting some of the profit into ISA's? There are 4 of us in the family without ISA's, can I put some of the money into an account for everyone to bring it down?