Transferring property retrospectively to cut CGT?

Ponsienella

I am wondering if there is a way to cut my husband and his brother's Capital Gains Tax liability by either:
1) Retrospectively transferring property to my sister-in-law and myself.
2) Retrospectively giving up a gift.

My husband and his brother were gifted 1/3 share of their father's home, which he continued to live in rent-free, in June 1997. He passed away 9 years later and died without leaving a will. His sons then inherited their father's remaining 1/3 share of the house between them.

The property has remained unoccupied for the past 10 years while we have been doing it up.

I have been looking at the CGT situation as we now wish to sell it.

I have been told about a 'Deed of Variation' but having read up I don't fully understand whether this could apply. If my husband and his brother were to be able to give up the gift so that it went back into the estate then they would each inherit 1/2 of the property as at the date of their father's death. This would then reduce their Capital Gain. (The property wasn't subject to IHT and is now only valued at about £130k - £140k).

Alternatively if their 1/3 shares could be retrospectively split between my sister-in-law and myself too then we could take advantage of our own personal allowance.

Thank you in advance to anyone who can advise me.

Bluebirdman_of_Alcathays

No - ownership of a property is a matter of fact. If what you were proposing were viable, we would all just "unown" things prior to crystallising a whopping big gain.


Deed of Variation may have applied (although there are general anti abuse laws if it is done purely to avoid tax), but that needs to be done within 2 years of death.

Ponsienella

Bluebirdman_of_Alcathays wrote: »

No - ownership of a property is a matter of fact. If what you were proposing were viable, we would all just "unown" things prior to crystallising a whopping big gain.


Deed of Variation may have applied (although there are general anti abuse laws if it is done purely to avoid tax), but that needs to be done within 2 years of death.

Thank you. I did think that was the case but wasn't sure as someone mentioned a 'Notice of Variation' to us so I presumed they meant a deed.

What would happen if my husband and his brother transferred 1/2 of their share in the property to us before it was sold. Would we be able to use our allowance or do you think it would be treated as if it had been done to evade tax?

Ponsienella

Can anyone advise how I can move this post into Tax Cutting as I've obviously posted in the wrong forum really?

getmore4less

Bluebirdman_of_Alcathays wrote: »

No - ownership of a property is a matter of fact. If what you were proposing were viable, we would all just "unown" things prior to crystallising a whopping big gain.


Deed of Variation may have applied (although there are general anti abuse laws if it is done purely to avoid tax), but that needs to be done within 2 years of death.

The primary purpose of deed of variation is to avoid tax.(IHT, CGT).
They have to be written carefully for it to apply.

Without the tax benefits they would be pointless as gifts would suffice.

booksurr

getmore4less wrote: »

The primary purpose of deed of variation is to avoid tax.(IHT, CGT).
They have to be written carefully for it to apply.

Without the tax benefits they would be pointless as gifts would suffice.

the primary purpose of a deed of variation is to VARY THE TERMS OF A WILL. OP's father died intestate without a will so there is nothing at all to "vary" as who gets what in an intestacy case is absolutely rigidly defined in law and cannot be varied (ever at all!).

booksurr

Ponsienella wrote: »

My husband and his brother were gifted 1/3 share of their father's home, which he continued to live in rent-free, in June 1997. He passed away 9 years later and died without leaving a will. His sons then inherited their father's remaining 1/3 share of the house between them..

so father died intestate leaving an estate which still included 2/3 of the property
as father had made a gift with reservation (GWR) in that he changed the name of the owners but continued to live in the property until death so for inheritance tax purposes it remained within his estate. I wonder who did the probate and were they competent?

Ponsienella wrote: »

The property has remained unoccupied for the past 10 years while we have been doing it up.

I have been looking at the CGT situation as we now wish to sell it.

so your husband and his brother have been owners since the date of transfer and have sat on a property which is amassing a CGT liability since that date

Ponsienella wrote: »

I have been told about a 'Deed of Variation' but having read up I don't fully understand whether this could apply.

not possible, intestacy means no will, so nothing to vary

davidmcn

booksurr wrote: »

the primary purpose of a deed of variation is to VARY THE TERMS OF A WILL. OP's father died intestate without a will so there is nothing at all to "vary" as who gets what in an intestacy case is absolutely rigidly defined in law and cannot be varied (ever at all!).

No, you can do a Deed of Variation of an intestate estate. You can't do it over two years after the date of death though - so the OP is eight years too late to be thinking about this.

Ponsienella

booksurr wrote: »

so father died intestate leaving an estate which still included 2/3 of the property
as father had made a gift with reservation (GWR) in that he changed the name of the owners but continued to live in the property until death so for inheritance tax purposes it remained within his estate. I wonder who did the probate and were they competent?

We did probate ourselves. We did complete the details showing the gift of the property and dates and valuation. The property was only worth about £95k when he died so way below IHT levels. HMRC confirmed no IHT to pay.

so your husband and his brother have been owners since the date of transfer and have sat on a property which is amassing a CGT liability since that date

Yep. You are right. Unfortunately we have had to spend money on it which we didn't have and illnesses by both brothers meant there were times when work had to go on hold. (I think there were emotional issues too in them not wanting to let go of their parents' home).

not possible, intestacy means no will, so nothing to vary

I have seen something about Deeds of Variation in cases of Intestacy which is what made me think about it in the first place.

getmore4less

booksurr wrote: »

the primary purpose of a deed of variation is to VARY THE TERMS OF A WILL. OP's father died intestate without a will so there is nothing at all to "vary" as who gets what in an intestacy case is absolutely rigidly defined in law and cannot be varied (ever at all!).

as others have pointed out it(DOV) does not change a will.

A DOV allows gifts from beneficiaries to be treated as if they were made by the testator(or deceased if intestate) for tax purposes.


they are a beneficiary change and nothing to do with the estate unless it would effect the tax of an estate then it needs the administrator to agree..

getmore4less

My husband and his brother were gifted 1/3 share of their father's home, which he continued to live in rent-free

who/how were these shares gifted was there any life interest in place for the father?