GCT on property questioin

skillboy

Hi All

My parents own a flat which they are thinking of selling.

The flat is in my dad's name only.

He bought the flat about 40 years ago for about £5000 and it is now worth about £80,000. CGT would be payable on this £75,000 gain.

I believe that transfers of assets between husband and wife are free from tax.

Would it make sense for my dad to transfer 50% of the flat to my mum first so that when the flat is sold, most of the CGT is paid at a lower rate of 18%?

Thanks for your feedback!

00ec25

depends on when he intends to sell it
HMRC have the power to ignore transfers between huisband and wife IF they consider the only reason for the transfer was to obtain the extra personal allowance

it is still perfectly possible and valid to do the transfer, but most advice sites say you should do it at least 1 year before you start to sell it. If you are already marketing the property for sale eg via an estate agent, it is far too late and will be ignored

ceeforcat

Exactly 00ec25

http://www.taxexpert.co.uk/property_tax/cgt_property.php

skillboy

Thanks a lot for your feedback.

The property has not been put on the market yet. It may be sold perhaps at the end of this year (2012) or before end of the current tax year.

There appears to be no hard and fast rule about the period of time a property is sold after being transferred between partners. Is it then up to HMRC to decide whether or not to investigate?

Would it be worth my dad just transferring 50% of the property to mum now, selling the property and then seeing what HMRC does, if anything?

ceeforcat

My advice, from experience. Do the transfer and retain full legal documentation from your solicitor - at the time of the transfer there should be no visible indication that you are intending to sell. Wait about a year and then put the property on the market - remember - you have to convince HMRC that, at the time of the transfer, there was no inclination to sell and, therefore, that the two 'transactions' are unrelated.

skillboy

Got it. Thanks a lot everyone.

getmore4less

It is a litlle bit more complicated than that

bought around 1972, first step will be valuation for 31st March 1982
http://www.hmrc.gov.uk/cgt/property/calc-cgt.htm#3

what was the property used for, second home, let etc. there may be other index/relief that apply

was it ever lived in as a mian residence that will also give some relief.

There are other options to try and dispose over multiple tax years but that complicates even more.