Capital Gains

holly_hobby

Thrugelmir wrote: »

Holly. Does this create another issue. As will CGT be based on market value not sales price. As the tranaction is with a connected party not at arms length.

No CGT liability for Mum, IF she does qualify for full PRR relief under the dependant relative exemption as discussed earlier (ie acquisition pre 5 April 1988 and Gran qualifing at point of pch under the terms I've discussed for the OP)

If the disposal does not qualify for this, then CGT is always based on the MARKET value at time of disposal, if gifted or being sold under value (on a chargeable event to a connected party).

Where as SDLT is always based on consideration ie what the property actually exchanges hands for ... i.e in this case 80k

Hope this helps

Holly

MuttonJeff

Hi Holly, thanks for the explaination. This makes things much clearer. As I see it the best option is either
1. If mother is exempt from cgt due to gran living in house, then I purchase it from her as per family discounted purchase, and so benefit from the low mtg.
Or
2. If mother is not exempt, then she gifts me the house and I remortgage for the purchase price in 6 months time, again benefitting from low ltv.

Will get an appointment with an Ifa/solicitor asap

holly_hobby

MuttonJeff wrote: »

2. If mother is not exempt, then she gifts me the house and I remortgage for the purchase price in 6 months time, again benefitting from low ltv.

Will get an appointment with an Ifa/solicitor asap

Ooooh hang about there .....

You have no gte that you will be able to release ....

a) any equity at all, due to status and/or lender being happy re purpose of equity release
OR
b) be unable to release sufficient equity to repay Mum her 80k

Please be clear that IF Mum has no PRR exemption, then whether any monies exchange hands at point of disposal or not (ie you pay her now or later) - her exposure to CGT is not reduced or deferred or based on the actual sale price, but as explained to Thruglemir, on its actual market value at point of tsf instead (less as already discussed, permitted deductable costs and annual unused CGT exemption).

Just want you and Mum to be v clear on this .....

Personally, whether there is CGT exposure and a bill or not ( with liability declared under Mums annual self assessment. If she doesn't curently use SA, this will occur if her taxable gain exceeds her unused exemption ie £10,900 2013/14 - she must register by 5 Oct 2013 and submit by 31 Oct 2013. IF she already uses SA, she reports any tax liability exceeding her annual unused exemption under the CGT pages, and must also report the transaction regardless of any tax liability, IF the amount recd on disposal exceeds £43,600 i.e 4 x annual exemption).

I would not tsf for "free" so to speak, but actually PURCHASE the property from Mum via a mortgage from outset. (subject to status). I would personally advise against initially transferring as a gift, as you are possibly opening yourself up to all sorts of probelms, in that later you will be attempting to subsequently remortgage an unencumbered (mge free) property, (which in itself can sometimes be problematic), for a significant sum of 80k, to effectively repay Mum an os debt. An application that may fall out of bed (refused or agreed amount watered down) for several reasons (inc status and/or purpose of loan), leaving Mum somewhat high and dry re payment of funds until the foreseeable.

Now, I don't say the above will happen, but given the figs involved, it'll be all too late for everyone if you don't discover this until you already own and Mum needs her capital pronto .....

Yes .... its now time to see a mge adviser and tax practitioner (re walking you through the CGT and (poss) IHT aspects of the case .... wish you well !

Hope this helps

Holly

MuttonJeff

Wow... They don't half make things complicated! Thanks again for taking time to explain this. Will seek out some advice asap!