Capital gains tax on house sale

Tjc66

My parents bought their council flat for £29,000 around 1990. About 1997 my father transferred the flat into my sister and my names. In 2001 they sold it for £120,00 and bought a house for £150,000, my sister and I had to sign all the paperwork involved in the sale and new purchase. My parents still lived in the properties whilst they were alive and no rent was paid. They've both now died so the house is now unoccupied. The house is now worth about £250,000 what are the tax implications if we sell? The rest of their estate is about £50,000 so they would have been under any inheritance tax limits.

uknick

If I understand you right, you and your sister own a house worth £250k which you have never lived in. Is this right?


If so, I you'll owe CGT on the gain, £250k ,less purchase price of £150k.


But, I am confused by the events in 2001, you say "they" sold the flat. But you also say you signed all the paperwork involved in the transaction.


Plus, if the flat was yours in 2001, did you ever live in it? If not, did you pay CGT in 2001?

Tjc66

We did live in the flat until we both got married but never when it was bought by them. My father had a habit of hiding important documents and money and I said to him I would need to demolish the flat to find things if anything happened to them. Later he just said he'd put the flat in our names we hadn't any input or signed anything.

uknick

Tjc66


If you owned the flat from 1997, that is from when the CGT will start to accumulate. But, there may be some principal residence relief. When did you and your sister move out?


I think some timescales may help here, with valuations at the time the changes occurred.

CLAPTON

if the house is in your names i.e. you are the legal owners then there is a potential cgt liability deonding upon the purchase price and the selling price


the gain will be split between you both and you each have a 10,900 cgt allowance

so approximately

gain is 250,000 - 150,000 = 100,000
less buying and selling expenses say 4,000

net gain 96,000

so 48,000 each
less cgt allowance 10,900

so tax at either 18% and/or 28% of £37,100 depending upon your other taxable income



PS this is sadly a good example of how not to tax plan
if your parents had still owned the property when they died, there would have been no IHT and no cgt

Mojisola

If you and your sister have been the owners of a property since 1997, I hope you haven't claimed any means tested benefits without disclosing this.

Even if it's your Dad who puts a bit of paper in front of you for your signature, read and understand what you're signing before doing so.

Tjc66

Thanks for all the comments, I think we will seek professional help to sort it out. We were in a no win situation anyway because my father spent his last 4 years in a care home and, with the extra fees, we would probably come out of it even worse off. Oh we'll that's life. Bye.

00ec25

Tjc66 wrote: »

Thanks for all the comments, I think we will seek professional help to sort it out. We were in a no win situation anyway because my father spent his last 4 years in a care home and, with the extra fees, we would probably come out of it even worse off. Oh we'll that's life. Bye.

in case you do look at this again there is one bright thing, you have successfully evaded the CGT that would be due on the council flat between the date your father put it into your names in 1997 and when you (not him) sold it in 2001, since that was before the price crash it almost certainly would have shown a gain ....

uknick

Tjc66 wrote: »

Thanks for all the comments, I think we will seek professional help to sort it out. We were in a no win situation anyway because my father spent his last 4 years in a care home and, with the extra fees, we would probably come out of it even worse off. Oh we'll that's life. Bye.

Mmm, was the house transferred to avoid care home fees? I would like to think not, just for IHT planning purposes.

Tjc66

No, he was diagnosed with dementia seven years after he moved. I think he may have had IHT on his mind but I think he thought it would be easier for us to deal with if it was in our names. Who knows if they're going to get dementia and need nursing care?