Capital Gains CGT help!!

limited02

We are disposing of a property which has been purchased since 1987. Originally my Father purchased it in his own name for £75,000. In 1998 he gifted it to be in joint names between him and my mother. There is no deed of gift but a confirmatory conveyance had been done and it was voluntarily registered at this time in joint names with an estimated value of not exceeding £400,000. My Father has passed away and the property is now being purchased by his SIPP. The property has been valued at around £350,000 so this will be the purchase price. But, where do we sit with capital gains tax? Is it based on the 1987 figure? Do I need to get a retrospective value of it to 1998 figures or do we base it on £400,000?

jimmo

When your father gifted a half share in the property to your mother he is deemed to have done so at no gain / no loss. In those days it was common practice to simply split the original purchase cost in two but, because of the demise of indexation relief, it may not be wise to follow that now.

In effect then your father was deemed to have sold the half share to your mother for half the original cost plus indexation relief.

In this particular case indexation relief would run from the original date of purchase (1987) to the earlier of 5 April 1998 or the date of the gift.

Indexation relief was calculated by reference to the Retail Prices Index but, as far as I can tell, the relevant details are no longer available on the HMRC website but this link gives the mechanics of the calculation.
http://www.hmrc.gov.uk/manuals/cgmanual/CG17270.htm

Given that there is roughly 11 years’ worth of indexation relief available you may find it worthwhile to search for the RPIs and make the calculation.

The half share that your father retained until his death will have passed to your mother at its open market value at the date of death.

Therefore your mother’s capital gain will be;

Proceeds of sale

Less original acquisition value ( 37,500 +indexation)

Less 2nd acquisition ( market value of a half share at the date of death of your father).