Capital Gains Tax

4500times

Hi All....New here so hope this is the right area for this.......Me and my 2 brothers inherited a property 4 years ago from our late mother,valued at 145k.....myself and one of my brothers gifted our share to our other brother to enable a mortgage to be raised of 40k to carry out essential modernisation.We have now completed this and in the process of selling the property.Our intention once this has been done is to split the proceeds between us equally (assuming that this can be gifted under the 7 year rule)and our question would be in regards to Capital gains tax.We understand that the current value of the property is circa 235k -240k.
So our question is...... how much CGT would we likely to incur combined or individually.
Any guidance would be appreciated.

CLAPTON

4500times wrote: »

Hi All....New here so hope this is the right area for this.......Me and my 2 brothers inherited a property 4 years ago from our late mother,valued at 145k.....myself and one of my brothers gifted our share to our other brother to enable a mortgage to be raised of 40k to carry out essential modernisation.We have now completed this and in the process of selling the property.Our intention once this has been done is to split the proceeds between us equally (assuming that this can be gifted under the 7 year rule)and our question would be in regards to Capital gains tax.We understand that the current value of the property is circa 235k -240k.
So our question is...... how much CGT would we likely to incur combined or individually.
Any guidance would be appreciated.

if you have gifted the property to your brother then you have no further interest in the property : it is your brothers

he will be liable for cgt when he sells

4500times

Hi Clapton thanks for your reply.......would this still apply if a" declaration of trust"is in place and we are "tenants in common".......and also if my brother was solely liable for CGT can he still gift equally to us after the sale and what are the CGT implications for us as individuals?

CLAPTON

4500times wrote: »

Hi Clapton thanks for your reply.......would this still apply if a" declaration of trust"is in place and we are "tenants in common".......and also if my brother was solely liable for CGT can he still gift equally to us after the sale and what are the CGT implications for us as individuals?

I don't understand what you are saying
are you TIC or not
who actually owns the property

4500times

My brother is on the title deeds and owns the property but is to divide any sale proceeds equally between the three of us......perhaps I am getting confused between TIC and ownership.......

antrobus

Is this the scenario?

3 brothers inherited a house worth £145k in 2012; 2 of the brothers transferred legal title of the house to the other brother (so that he could get a mortgage etc) BUT there was a declaration of trust prepared that confirmed that all 3 brothers retained beneficial ownership of the property. (Hence the reason the proceeds were going to be split equally.)

CGT is based on beneficial ownership.

So the 90k or so profit on the house would be split three ways. Which might be what you want; because each brother has a tax-free CGT allowance of £11,100.

jgh

This is close to a query I've been trying to clarify. I'm planning on retiring and selling my shop, it's owned jointly with another person, I was trying to work out if the calcualtions are done by splitting the sale into two, or done as one then we split the after-tax proceeds up.

Antrobus seems to be saying that we split it in two, and then calculate the tax, for example:
Bought shop for £50,000 (years 'n' years ago!)
Sell shop for £200,000
Deduct capital investment of £50,000 (improvements only, not wear&tear, repairs, etc)
£200,000 - £50,000 - £50,000 = £100,000 gain
Split £100,000 into two x £50,000 for the two owners
Owner 1:
£50,000 minus £11,100 CGT allowance = £38,900 taxable
Other income during the year is Basic Rate or Zero Rate
So, 18% on the amount equivalent to Basic Rate band
So, 18% x £32,000 = £5760
And 28% on the remaining £38,900-£32,000
So, 28% x £6,900 = £1932
Total GCT for owner 1 = £5760+£1932 = £7692

Owner 2 does the same calculations, gets CGT=£7692.

So, a total of £15,384 to the taxman.

Is that the right method?
Thanks.

[Deleted User]

A little knowledge is dangerous! Have you considered the following?

https://www.gov.uk/entrepreneurs-relief/eligibility

You also should be declaring half of every part of the calculation on each return. Additionally if part of your basic rate band is used elsewhere you can only use the remaining amount against your capital gains liability not the whole £32000

jgh

[Deleted User] wrote:

A little knowledge is dangerous! Have you considered the following?
https://www.gov.uk/entrepreneurs-relief/eligibility

Ok, so that's just changing the 18%/28% to 10%. But is the above calculation method correct? Split into two and then do two sets of calculations?