CGT on inherited property sale

adonis10

Is there any way that a married couple could transfer the ownership into both names, thus using both CGT annual exemptions?

Also, say the MV at inhertiance date was 150k, 15k was spent renovating the property and it sells at x date for 180k - is on able to deduct the costs to renovate?

SP - 180
MV - (150)
Costs - (15)

Gain - 15k

Is that correct?

ceeforcat

adonis - this has been raised several times recently and I can only repeat my own experience where HMRC has challenged such a transaction into joint names. Broadly, if the only reason for such a transaction is to reduce tax, they will treat it as not having happened.

If you are going down that line, make the gap between the transfer and ultimate sale as large as possible (minimum one year and before the 'for sale' sign goes up) so as to increase the likelihood that both are not linked i.e. when you transferred the property into joint names you had no intention of selling. Document everything and obtain a formal valuation at the time of the transfer.

Your calculation looks fine - don't forget to deduct the costs of sale.

adonis10

ceeforcat wrote: »

adonis - this has been raised several times recently and I can only repeat my own experience where HMRC has challenged such a transaction into joint names. Broadly, if the only reason for such a transaction is to reduce tax, they will treat it as not having happened.

If you are going down that line, make the gap between the transfer and ultimate sale as large as possible (minimum one year and before the 'for sale' sign goes up) so as to increase the likelihood that both are not linked i.e. when you transferred the property into joint names you had no intention of selling. Document everything and obtain a formal valuation at the time of the transfer.

Your calculation looks fine - don't forget to deduct the costs of sale.

Thank you.

It will not be a year, more like <6 months. Will bear this in mind.

The costs to renovate will be in the region of 10-12k by the time it is complete. Costs include new kitchen/bathroom/carpets/central heating/windows. I assume that they will all be allowable, or could HMRC challenge them as being 'repairs'?

If they are allowable, I doubt there will be any need to go down the joint ownership route as the annual exemption + 12-15k costs should easily cover any gain.

ceeforcat

I would regard most of those as Capital Expenditure and, therefore, available to claim against your potential Capital gain.

Personally I would not regard carpets in the same light in the normal rental income scenario but, if they are to be regarded in the 'making property more attractive to sell' category, you would probably get away with it.

00ec25

I assume MV of 150 is the figure you used in the probate declaration otherwise your "cost" is not 150k, it would be whatever was the probate value

John_Pierpoint

What would be the effect of a deed of variation to make the spouse on of the beneficiaries from the date of death?

jimmo

00ec25 wrote: »

I assume MV of 150 is the figure you used in the probate declaration otherwise your "cost" is not 150k, it would be whatever was the probate value

That is only true if the probate value has been "ascertained".
That is where the probate value has been accepted by HMRC and Inheritance Tax has been paid.
http://www.hmrc.gov.uk/manuals/cgmanual/CG32224.htm
If a person died today and his estate consisted of £20,000 cash plus a house then Inheritance Tax would only be payable if the house was worth more than £305,000.
If the person who applies for probate can reasonably estimate that the house is worth something between £200k and £250k he may consider it sensible to declare the value of the house to be £250k, or maybe a bit more. After all, no IHT would be payable and there is little practical point in paying for a professional valuation.
In my days at HMRC, capital gains computations based on unascertained probate valuations were like manna from heaven because it was virtually certain that the probate value had been overstated.

taxing

ceeforcat wrote: »

adonis - this has been raised several times recently and I can only repeat my own experience where HMRC has challenged such a transaction into joint names. Broadly, if the only reason for such a transaction is to reduce tax, they will treat it as not having happened.

I am staggered by this statement and have never come across this being challenged in (professional) 'practice' where it is (very) common tax planning advice.

Were you said to be trading in property perhaps? Or, did you maybe 'forget' the actual legal formalities (it must be done legally with - usually- the help of of a property solicitor to change legal title in the property in to joint names) and you should really make the share of the proceeds available to the recipient spouse.

Thanks

SeniorSam

Deed of variation within 2 years transferring the assets to two persons would benefit when those persons sell the property and both have a CGT allowance. All costs to renovate would be allowable.

Sam

ceeforcat

taxing wrote: »

I am staggered by this statement and have never come across this being challenged in (professional) 'practice' where it is (very) common tax planning advice.

Were you said to be trading in property perhaps? Or, did you maybe 'forget' the actual legal formalities (it must be done legally with - usually- the help of of a property solicitor to change legal title in the property in to joint names) and you should really make the share of the proceeds available to the recipient spouse.

Thanks

No taxing - what is truly staggering is the arrogance which you tend to display on almost all of your postings, particularly lately. Basically I am wrong because you work in a 'professional' office. You continuously 'big' up your current employment and criticise the advice of many, including those who display a vastly superior knowledge to you and, most definitely, me.

For your information, the example that I quoted referred to a client and the challenge was made even after the wife had died. I have been in the profession for almost thirty years.

Now, if you read my post, you will see that I suggested that the transfer would be possible but I did advise to create a gap between the transfer and the sale. That is good tax planning.

So I didn't 'forget' the legal formalities as you condescendingly suggest and I would not agree one bit with the advice in your final sentence:

'help of of a property solicitor to change legal title in the property in to joint names) and you should really make the share of the proceeds available to the recipient spouse.'

Still don't believe me!

Have a read of the following: perhaps you need to further advise those clients who received your (very) common tax planning advice.

http://www.taxexpert.co.uk/property_tax/cgt_property.php (the bit about taxman's attack)


http://www.property-tax-portal.co.uk/taxquestion43.shtml

taxing

Rebuke taken:you are quite correct; sorry. Unacceptable behaviour.

Regards