Cgt on money given

grubsters

My Husband and I own a property that a my Mum lives in currently. Upon moving in she gave us 50% of the value of the property as her share (from her house sale) but was happy not to go on the deeds. As such, are we liable to pay cgt on the £90k given to us (which we used to pay off the mortgage on the property)??

getmore4less

No taxes on gifts.

There is a mine field of other tax issues, CGT on the property when sold, gift with reservations and preowned assets for mum.

grubsters

Thanks for your reply. So I don't need to worry re the cash given then?! I dont understand what you mean in ref to: gift with reservations and pre owned assets from Mum? Any chance you could advise? Thanks in advance.

00ec25

grubsters wrote: »

Thanks for your reply. So I don't need to worry re the cash given then?! I dont understand what you mean in ref to: gift with reservations and pre owned assets from Mum? Any chance you could advise? Thanks in advance.

although (astutely) mother is not an owner of the house the fact that it is her money which enabled you (its legal owners) to pay off the mortgage so she can live there rent free removes the direct threat on IHT but risks 2 consequences HMRC has rules about

a) pre owned assets - mother is using her own money to pay for a property she lives in therefore it can be argued that she has in fact "bought" her own residence and so outcome is 90K will be included back into her estate on her death for IHT purposes

b) gift with reservation is a less likely risk but covers the situation where the parent transfers an asset (incl cash) to the children but the parent continues to "benefit from the asset" by continuing to use it ie live there in this case - outcome is the asset is therefore included back into the estate valuation on death

a) and b) only relevant in practice if mothers total estate is above the IHT threshold at date of death (currently between £325,00 - £650,000 depending on what happened to father's allowance

xylophone

Did you and your husband originally own the second property (with mortgage)?
Your mother lived elsewhere in her own home?

Your mother sold her own home. She made you a gift of £90,000 and you used the gift to pay off the mortgage on the property you owned.

Your mother now lives rent free in the property?

Was the gift conditional on being allowed to move into the property?

Was the gift in any sense a forward payment of rent?

Is your mother's estate above or likely to be above the nil rate band (or possibly double nil rate band)?

Is there any likelihood that she might need means tested benefits or care?

grubsters

Thank you kindly for your response. I am still confused by the gift element though as whenever I look on the web I can't find anything to say that cash gifts are exempt from cgt....in fact what I am finding is to the contrary . Please can you help???

grubsters

Thanks xylophone:

Yes home owned with mortgage.
Yes, mum lived elsewhere then sold her home and moved into ours, gave us £90k and lives there now.
Gift was unconditional and not a forward payment.
Is the nil rate band the inheritance band if £325k, if so then no, mums estate is nowhere near that.

grey_gym_sock

yes, £325k is exempt from IHT (or more when the spouse's exemption can be transfered).

CGT is not a tax on gifts, it's a tax on the increase in value of an asset while you own it. this is, at its simplest, the difference between what you sell it for and what you bought it for. but, if you give something away, its value when you give it away is used, instead of the sale price (nil).

00ec25

grubsters wrote: »

I am still confused by the gift element though as whenever I look on the web I can't find anything to say that cash gifts are exempt from cgt....in fact what I am finding is to the contrary . Please can you help???

CGT is a tax on the gain in value of capital items
cash (assuming it is sterling not foreign currency) by definition cannot gain in value which is why there is no need to reference to CGT on a cash gift

£1 in cash cannot increase it value, it is still valued at £1 even one hundred years later, therefore, without growth in value, there cannot be CGT on it
Hence no CGT on cash gifts

what you are finding is reference to gifts of other types of assets - ie items whose value can change (eg property, gold, silver, foreign cuirrency etc) and therefore if those are gifted then there could be a differnce bewteen the value at the time they were originally acquired by the giver and the later value at the time they were given away

xylophone

There is no tax on the gift.
It doesn't seem as though there will be any IHT to pay.
She has no worries about the gift of cash if she is not on or seeking means tested benefits.


I take it that you are not living in the house with your mother (i.e. it is not your principal private residence).

See here re sale http://www.hmrc.gov.uk/cgt/property/basics.htm