Capital Gains tax enquiry

x.nukke.x

Hi all

My granny wants to sell her house and buy a bungalow - however her house is under her childrens names (ie my mum, my two uncles and my aunt) as has been for more than 7 years. If the family attempt to sell this would they get hit by capital gains tax? Is there any way around this or any way to lessen the blow?

My granny bought her house for £11,000 almost 45 years ago, so selling it now for £95,000 would make things quite difficult!

Thanks

Lauren

poppysarah

Your granny doesn't have a house to sell does she - if it's not in her name...

CLAPTON

if her children do not live in the house and they own it then they are potentially liable to cgt

when did they acquire the house?
what was it's value at the time of acquisition

the gain will be the sale price minus the value at acquisition less costs of selling.
they will each have a cgt allowance of 10,100 so this will help reduce the tax.

tyllwyd

I think you need to get professional advice from this to try to avoid any big bills. I'd have thought that each of the co-owners would be liable to CGT on their own share of the property, but they would have their own CGT allowance, and it would be based on the value of the property as it was when it was transferred into their names - but that's only a layman's guess. You could try the cutting tax board, there are people there who are very clued up on tax.

Edited to say, sorry, posted at the same time as Clapton & saying much the same thing.

00ec25

to reaffirm the above posts, yes CGT will be an issue

each of the 4 owners will have to calculate if they have any CGT to pay, it will be the difference between the value on the date it was transferred to their name and the sales value (less any costs)

each owner is allowed to reduce their share of the taxable gain by the amount of their annual exemption which they have not already used up on any other CGT gains in the current tax year - the max each can reduce their gain by is £10,100 - note this personal allowance applies in the year in which they sell their asset, you cannot claim any unused amounts from previous tax years

assuming no one has anyother gains in this tax year then the total gain from 7 years ago to now would need to be more than £40,400 before each person (assuming the split is 25% each) actually pays any CGT.

how much CGT each person would pay, if relevant, then depends on their own tax position - ie whether they fall into the higher rate 28% of the "standard" rate of 18%

BTW - have you investigated the deprivation of assets rules if there is any risk that granny may end up in council funded care? The transfer of the house may be ignored in some circumstances and will stop her getting some state benefits

silvercar

BTW - have you investigated the deprivation of assets rules if there is any risk that granny may end up in council funded care? The transfer of the house may be ignored in some circumstances and will stop her getting some state benefits

I don't think deprivation of assets looks back more than 5 years, so providing fram has been paying rent it would not be looked on as her home. If she has lived there rent free, then it would be considered that she hasn't really given it away.

As others have said, each owner would have a CGT liability, based on the difference between the value of their share when bought and its current value. Against that they can put their CGT allowance of £10,100 if not used elsewhere. If their gain is larger and they are married and trust their spouse, they could transfer half their share to their spouse before sale and gain another CGT allowance to use against profit.

nukke

CLAPTON wrote: »

if her children do not live in the house and they own it then they are potentially liable to cgt

when did they acquire the house?
what was it's value at the time of acquisition

the gain will be the sale price minus the value at acquisition less costs of selling.
they will each have a cgt allowance of 10,100 so this will help reduce the tax.

They got the house in 2002 and it was worth more then than it is now - they could have got between £100,000-£110,000 at the time of the valuation.

Because the house was worth more then, what would the impact be?

silvercar

nukke wrote: »

They got the house in 2002 and it was worth more then than it is now - they could have got between £100,000-£110,000 at the time of the valuation.

Because the house was worth more then, what would the impact be?

Then they haven't made a gain! So no CGT to pay.:)

As the sale triggers a potential liability, it should still be included in the individual tax returns.

AFAIK transactions between related parties are deemed to have taken place at market value, even though no money may have changed hands.

housebuyer_abc

Higher up the post reference was made to granny and whether or not she paid rent...

This is very important, if she paid rent then all is okay, if she didn't then although for CGT she is no longer the owner, for things like care bills she has disposed of assets.

The five year (it's actually not fixed AFIK just a guideline) limit on disposal would only kick in from the date she pays something approaching market rent to the property 'owners'

I would suggest a property lawyer is the way to go here, there are a lot more pitfalls than just CGT - which after all is a tax on a windfall so not the end of the world if you do have to pay something