Property inheritance tax and gifting property

purdyoaten

CLAPTON wrote: »

your father will be liable for cgt on his share however he disposes of the property

who declares the rent to HMRC?

Agreed. In answer to the first question by the op, Personally I would opt to purchase the 1/3 and have dad gift the cash - formal market value would need to be obtained. This gets rid of the problem with the brother who I am sure would not be terribly excited in owning 1/6 of a property and having to declare the rental to HMRC.

xylophone

At the moment, your brother has no interest in this property.

Your father would like to make your you and your brother a present.
Isn't the cleanest solution for you to buy out your father's interest and for him to do as he wishes (make a cash gift to you and your brother?) with the proceeds?

Biggie

purdyoaten wrote: »

Agreed. In answer to the first question by the op, Personally I would opt to purchase the 1/3 and have dad gift the cash - formal market value would need to be obtained. This gets rid of the problem with the brother who I am sure would not be terribly excited in owning 1/6 of a property and having to declare the rental to HMRC.

Yes sounds like the cleanest solution but then essentially i'm concerned my father would have to pay the GCT before he gifts us the money.

So in essence we would be taxed on what we would consider inheritance tax (which is below the threshold btw)

Biggie

not sure of the implications but could my father not gift me the property and I essentially gift him the cash to give me brother he's 1/3

lincroft1710

Depending on the difference between the property's current value and value when acquired, and taking into account the annual tax free allowance (2013-14, £10,900) your father may not have any or very little CGT to pay.

xylophone

http://www.hmrc.gov.uk/cgt/property/reliefs.htm

Biggie

currently would need 3x that allowance..

cte1111

Your Dad could dispose of 11% this tax year, same for next year and the year after. Then he would benefit from the 3 lots of CGT allowance.

Is your Dad married? If so, he could transfer half of his share of the property to his spouse then they could sell their part to you. This would mean using up their CGT allowance as well.

purdyoaten

cte1111 wrote: »

Your Dad could dispose of 11% this tax year, same for next year and the year after. Then he would benefit from the 3 lots of CGT allowance.

Is your Dad married? If so, he could transfer half of his shares to his spouse then they could sell the shares to you. This would mean using up their CGT allowance as well.

It is a property - not shares!

purdyoaten

Biggie wrote: »

not sure of the implications but could my father not gift me the property and I essentially gift him the cash to give me brother he's 1/3

The gift would be treated in exactly the same way as if you paid him full market value. If his third share is valued at £50000 - that is the sale proceeds for CGT whether or not you pay him a penny.