Avoiding Capital Gains Tax

starblazer

Hi, I jointly own a flat(second property)which I rent. Can I add my 2x adult daughters to save on Capital Gains Tax (joint ownership of 4) for when I eventually sell the flat. After 2 x personal allowances the profit is currently about £50,000 before CGT. Thanks,Stabilizer.

anselld

Do you mean make a gift to them of ownership shares and ultimately sale proceeds?

purdyoaten

starblazer wrote: »

Hi, I jointly own a flat(second property)which I rent. Can I add my 2x adult daughters to save on Capital Gains Tax (joint ownership of 4) for when I eventually sell the flat. After 2 x personal allowances the profit is currently about £50,000 before CGT. Thanks,Stabilizer.

You can. Anselld has raised one issue which is highly relevant. However - you have clearly indicated that the only reason for so doing is to save Capital gains tax and not for any business reason. Your daughters have never received any rental income from the property and, if there was no CGT, would never have become part-owners. In my view, HMRC would challenge the transfer. If you do wish to go down this route, I would ensure that there is a reasonable period of time (perhaps up to a year) between transfer and sale - your daughters would receive their share of rental income and complete SA returns accordingly. The decision remains yours.

le_loup

Doesn't the gift attract CGT at the current price to non-spouses?

CLAPTON

you will immediately become liable to cgt on part disposal i.e. if you gift/sell a share to your daughters.


they will need to declare any rental income to HMRC in the normal way

Sue_S

I've been considering doing this too, perhaps gifting up to the CGT level each year. I understand that you can complete a Profit Allocation Agreement which can state exactly who receives the rental income so that your daughters do not have to receive/pay tax on the income. I'm not 100% sure on this so would appreciate any comments.

starblazer

Hi All, Thanks for your replies.
I will "probably" sell the flat in approx 5 x years time. Until then, if I add my 2 x daughters as owners now, (ie a quarter share in the flat), with all 4 of us paying tax on rental income, can I pay less CGT (legally of course) when we sell.(ie . using their allowance as well as ours.). Hence trying to reduce Capital Gains Tax legally on the sale profit.
Many thanks, Starblazer.

le_loup

have you not read the replies that you have thanked?
You will pay CGT NOW if you dispose of the asset.
disposal means selling, gifting or any other 'ing.

zygurat789

The OP is sitting on a property with a £72,000 profit subject to CGT.
Could he not gift 25% of this property to a daughter on 4 April they would have to declare, on their tax returns, a profit of £18,000. Since the property is jointly owned this would be covered by their annual exempt amounts and, therefore, there would be no CGT to pay. If they were to gift 25% of this property to the other daughter on 6 April they would have to declare, on their tax returns for the next year, a profit of £18,000. Since the property is jointly owned this would be covered by their annual exempt amount and, therefore, there would be no CGT to pay.
Or would HMRc catch it anyway?

Ne5555

can he sell all of it to his daughter between say -50000 -72000 and his daughter would sell it in one year +72,000 and if that was her main residence there would be no CGT to pay?
I believe there is no CGT on the residential property

zygurat789

purdyoaten wrote: »

You can. Anselld has raised one issue which is highly relevant. However - you have clearly indicated that the only reason for so doing is to save Capital gains tax and not for any business reason. Your daughters have never received any rental income from the property and, if there was no CGT, would never have become part-owners. In my view, HMRC would challenge the transfer. If you do wish to go down this route, I would ensure that there is a reasonable period of time (perhaps up to a year) between transfer and sale - your daughters would receive their share of rental income and complete SA returns accordingly. The decision remains yours.

Well purdy that's certainly going in with both guns blazing with the revenue case.
I'm sure that, on reflection, the OP would agree that a gift to his daughters in these straightened times would be the fatherly thing to do.
I'm sure that the reason the daughters never (directly) received any rental income was that they were not the owners.
If HMRC may wish to contend that the only reason for this gift was the avoidance of CGT but I feel they would have a hard time proving it.