Selling property to my wife, will this save CGT?

skillboy

Hi

I am posting this question up on behalf of my parents.

My parents live in their own house and my dad owns flat which he rents out. The flat is sitting on a capital gain of perhaps £50,000 as it has been held for about 20 years!

My dad wants to gift the flat to his son but that will incur a big CGT bill. Could he do this instead?

1. Sell the flat to my mum at the market price, say £70,000. My mum actually pays my dad the money so it is an "arms length transaction".

Since this is a sale from one spouse to another, is there any CGT for my dad to pay? (I know transfers between spouses are exempt from CGT, but what about actual sales?).

2. My mum then gifts the flat to her son, no CGT for her to pay because the flat has not gone up in value. She then lives for 7 years so also no IHT to pay.

Any flaws to this idea?

DigForVictory

If mum or dad need serious nursing care in their (may it be long & happy) future, these transactions will come under scrutiny by the local authority looking to recover nursing home fees.

It isn't *just* the taxman you need to watch out for any more.

CLAPTON

they can't avoid cgt by doing this


if it were a genuine sale then your father would pay cgt

if it is to a wife, then although he doesn't need to pay cgt, her acquisition cost will be father's purchase price so will pay cgt when she
disposes of the property.

xylophone

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

Property that's not your own home

If you sell, give or dispose of a property to your husband, wife or civil partner you don't normally pay Capital Gains Tax. You must have lived together for at least part of the tax year in which you made the disposal.
However, if your husband, wife or civil partner later sells or disposes of the property, they'll have to work out the tax due. It's useful to keep a note of what the asset cost you. Your spouse or civil partner may need this to work out their Capital Gains Tax when they dispose of the asset.
You have to work out if you made a gain or loss and any Capital Gains Tax due if you dispose of a property to:
any other family member
your husband, wife or civil partner if you haven't lived with them during that tax year"

xylophone

https://forums.moneysavingexpert.com/discussion/comment/65679245#Comment_65679245

You/your parents were going to obtain qualified, professional advice?

JimmyTheWig

Would probably be best to ask subsequent questions about the same scenario on the same thread.
Or at least say in your new OP that you've asked similar questions previously.

Otherwise it makes it look like you didn't like the answers you got in your other threads and are trying again on a new thread.

uknick

Is skillboy demonstrating the initial traits of madness

i.e.

"Insanity: doing the same thing over and over again and expecting different results

zygurat789

skillboy wrote: »

Hi

I am posting this question up on behalf of my parents.

My parents live in their own house and my dad owns flat which he rents out. The flat is sitting on a capital gain of perhaps £50,000 as it has been held for about 20 years!

My dad wants to gift the flat to his son but that will incur a big CGT bill. Could he do this instead?

1. Sell the flat to my mum at the market price, say £70,000. My mum actually pays my dad the money so it is an "arms length transaction".

Since this is a sale from one spouse to another, is there any CGT for my dad to pay? (I know transfers between spouses are exempt from CGT, but what about actual sales?).

2. My mum then gifts the flat to her son, no CGT for her to pay because the flat has not gone up in value. She then lives for 7 years so also no IHT to pay.

Any flaws to this idea?

Maybe £5k - £7850. Big? IHT could be £28,000

00ec25

oh dear, it appears insanity rules

as I told you previously you cannot avoid CGT where the transaction involves CONNECTED PERSONS !!!!!!!!!!!!!!!!

you could have confirmed this yourself by "researching" the arms length definition ... "If you sell or otherwise dispose of an asset to a 'connected person', you're treated as if the disposal was not at arm's length."http://www.hmrc.gov.uk/cgt/intro/glossary.htm

the nanosecond the property moves to you, your sibling, your half sibling, your sibling twice removed, your mothers adopted child, your father's adopted child, or anyone other than between your mother and father it is a transfer to a connected person and so subject to CGT

you posting new threads having "discovered" technicalities such as arms length relationships will not alter the fact that your parents cannot transfer ownership to you and evade CGT by so doing

PAY FOR PROFESSIONAL TAX ADVICE IF YOU WANT TO AVOID TAX

Caz3121

xylophone wrote: »

https://forums.moneysavingexpert.com/discussion/comment/65679245#Comment_65679245

You/your parents were going to obtain qualified, professional advice?

and this thread https://forums.moneysavingexpert.com/discussion/4982440

Not sure if you are asking the same question over and over in the hope of getting a different answer

pjclar02

They could look at gifting the property into a discretionary trust, with the children as beneficiaries, which may secure relief from capital gains tax - however it would depend on their inheritance tax position and any other gifts made, and there are many complications to consider (tax, legal and cost-wise) in setting up a trust