Capital gains tax?? Gifted Property Please help

Chellef19

In 2005 My grandad gifted his house to me and was living in the house rent-free until sadly he passed away in December 2018.

We have recently had an offer accepted of £105,000 my question is What capital gains would I have to pay there was no mortgage on the property and expenses for the sale is around £2200 I personally only earn £10,200 a year in my employment.
Another thing with the proceeds of the sale it is been split between three people myself my sister and my cousin as per my grandads wishes?

Just need some idea as I will need to hold some of the proceeds back to pay this tax in January 2020

Any help on this would be absolutely amazing thank you in advance

Pennywise

You need to see either a tax consultant or a solicitor who's good with CGT and IHT.

By him continuing to live in it, it's probably a "gift with reservation" for IHT purposes, so may still form part of his estate upon death.

Usually your acquisition cost for CGT will be the value on the date it was gifted to you, so hopefully you had it valued then and the value is noted along with the legal property transfer documents. Without knowing the 2005 value, no one can help you with calculating the amount of tax due.

The fact the proceeds are split between three people tends to suggest you didn't have sole beneficial ownership, but maybe that all three of you held a third share each, so perhaps your capital gain is based on one third of the selling price less one third of the 2005 value. You need a tax specialist to look at whether "beneficial" ownership applies in the exact facts of this case.

Chellef19

Thank you for your reply the house deeds were changed into my name in 2005 with regards to splitting it between three people that was just an agreement between my grandad and myself verbally nothing is wrote down regarding splitting it but I didn’t think that I would need to pay inheritance tax as I technically have not inherited anything.

It’s so hard people work so hard for a living pay attacks all their lives and even when they leave stuff to relatives of gift things that person still has to pay tax when me personally I’m not very well off at all ��

[Deleted User]

Before we can proceed:

What was the value of the property at the time of the gift, even approximately?

Is your grandad's estate likely to exceed £325000?

Chellef19

House was around £95000

My mam is executor of will but specifically states house is not part of estate as that was not his to give if that makes sense

p00hsticks

Chellef19 wrote: »

House was around £95000

My mam is executor of will but specifically states house is not part of estate as that was not his to give if that makes sense

The problem is that because he continued to live in it rent free it counts as a 'gift with reservation' and so the property probably IS part of his estate - that's the law, and writing something to the contrary in a will doesn't get round it.


It's worth getting expert advice, but be prepared to find out that it may have saved taxes if your grandfather had just kept the property in his own name. (hindsight is a wonderful thing).

[Deleted User]

Chellef19 wrote: »

House was around £95000

My mam is executor of will but specifically states house is not part of estate as that was not his to give if that makes sense

OK - sometimes better to get answers which makes all scenarios irrelevant.

1. There is a profit on the house of £10000 less legal fees £2200 = £7800. Consequently there is no Capital Gains tax to pay whatsoever even if in your sole name (which, to all intents and purposes it appears to be). However you do have to declare it and you would require an independent valuation at the time of the gift. Around £95000 won't cut it!

2. As pennywise has said, the house WILL form part of his estate as he continued to live in it. HMRC will determine that he disposed of an asset that he continued to use for his own purposes i.e. 'didn't really dispose of it'.

If the total value of his estate is below £325000 there is nothing to pay. There is also an ADDITIONAL main residence exemption of £125000 in this tax year.

I don't think that you have too much to worry about.

Relax. :T

macman

You don't have to pay any inheritance tax at all: IHT is paid by the estate, not by the beneficiaries.
As pointed out above, the CGT is below your annual CGT allowance (currently £11,700) even if you were liable for 100% of it: at 33% there will be nothing due. So what matters in terms of IHT is the probate value of the estate, including the house.
Your GF should have been advised to pay a commercial rent to the three of you after gifting it, otherwise it is most certainly a gift with reservation, so will fall within the probate valuation at it's value at the date of death.

[Deleted User]

macman wrote: »

You don't have to pay any inheritance tax at all: IHT is paid by the estate, not by the beneficiaries.
As pointed out above, the CGT is below your annual CGT allowance (currently £11,700) even if you were liable for 100% of it: at 33% there will be nothing due. So what matters in terms of IHT is the probate value of the estate, including the house.
Your GF should have been advised to pay a commercial rent to the three of you after gifting it, otherwise it is most certainly a gift with reservation, so will fall within the probate valuation at it's value at the date of death.

But the property is covered by the additional property allowance as its value is less than £125000.

Chellef19

Thank you his whole estate is less than £325,000

Where does a declaration of trust come in?

Do i have to do a tax return in January 2020 to declare all this? Personally cannot afford an accountant

Chellef19

Myself and my grandad had a declaration of trust drawn up regarding the property I’ve googled this and found a few bits of information I’m not worried personally about if the houses in his estate as the house as his estate was left to my mum (His daughter) but this is what I found about the declaration of trust

Entering into a formal Declaration of Trust allows the gift to be protected in this way. A Declaration of Trust can 'ring fence' the value of the gift to one party, so that, in the event of a sale, that gift is returned to one party in full (subject to the level of equity in the property at the point of sale)