CGT on Sale of Gifted Property

Johno96

00ec25 wrote: »

others have already listed why this is a bad idea for all sorts of reasons, but to answer your tax question
CGT would be due on the gain in value between its market value at the date of the gift and its market value at the date of the sale (ie what it sells for)


as you have not given any values the amount cannot be forecast.


tax rules can also change radically over time so be very careful

Thanks for your response. The property has only just been gifted for a number 'Family' reason and the current 'statistical' market value of the property is £250,000. I say 'statistical' because from what I know of the property and the remedial work required on it, the sale price will likely a good deal less than that. My Mother-in-Law is 93, so realistically I don't expect the value to inflate a great deal before her demise. We are all prepared for the possibility of IHT. But the 'Family' reasons have taken precedence. We just wanted to understand the likely CGT implications. I thought I read somewhere that CGT for a gifted property was based upon the increase in value from the time it was purchased (in the 1950's) to it's present value. I was hoping this was incorrect. Thanks again.

Johno96

HappyHarry wrote: »

For the CGT liability answer, see the post by 00ec25 above (post #6).

For all us curious posters, why did your mother-in-law decide to transfer the ownership of her home to her children?

It's all done and dust now so can't be undone. She simply wanted to remove her home from her estate so that her niblings, from her deceased son could not lay claim to it when she passes away.

Pennywise

Johno96 wrote: »

It's all done and dust now so can't be undone. She simply wanted to remove her home from her estate so that her niblings, from her deceased son could not lay claim to it when she passes away.

She could have just written a will with a side-document witnessed by her solicitor as to the reasons why she didn't want her deceased son's children to inherit. What she's done is a sledgehammer to crack a nut that may not even achieve her wishes. Did her solicitor not go through her options with her?

getmore4less

Johno96 wrote: »

RESIDENTIAL CARE : Not a problem - we'll pay
CAPITAL GAINS TAX : That's the part we want to know about
UPKEEP : My mother-in-law is of independent means and does not need support.
MEANS TESTED BENEFITS : Not likely, we own our homes outright and have healthy pension provisions.

Probably just lost £150k-£350k of aditional nil rate band that may have been of use if her estate(which still includes the house value for IHT) is over the £325k-£650k she has available.

xylophone

so that her niblings, from her deceased son could not lay claim to it when she passes away.

nibling (plural niblings)

(uncommon) The child of one's sibling or of one's sibling-in-law (in other words, one's niece or nephew), especially in the plural or as a gender-neutral term.
Synonym: nephling


Do you mean that she was seeking to disinherit her grandchildren?

If she does not wish this to be seen as a "gift with reservation", she will need to pay a market rent to the donees.

The donees will need to declare the rent to HMRC.

I guess that they are also now "landlords" and should comply with any relevant legislation.

CGT will be calculated on increase in value between the date of the gift and sale.

Her estate may well have lost out on the so called "family home allowance".

https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band

If the purpose of the gift was solely to disinherit her grandchildren, she would have been far better advised to leave a letter with her will explaining her reasons?

getmore4less

Might as well put the [STRIKE]conspiracy[/STRIKE] speculation hat on.

xylophone wrote: »

If the purpose of the gift was solely to disinherit her grandchildren, she would have been far better advised to leave a letter with her will explaining her reasons?

A will could be (re)written to have the two living children inherit but perhaps they are worried that will could be challenged.

A common challenge is undue influence and or capacity

Go one stage further if there is a current will that includes the deceased child as a beneficiary

Is that will getting changed as well as gifting the house.

Given the age and timing any challenges could apply to the gift as well as any changes to the will.
The gift just moved the house a bit further away and a bit harder to get at.

Pennywise

getmore4less wrote: »

A will could be (re)written to have the two living children inherit but perhaps they are worried that will could be challenged.

That's why a side letter witnessed by the solicitor giving reasons is always a good idea when this is a possibility.

I've known of two will challenges, both of which were lost, because of evidence provided by the solicitors as to the sound-mindedness and reasoning of the deceased, in both cases, the solicitor provided an affidavit confirming their meeting(s) with the deceased and producing the signed/witnessed side letters.

It tends to be the D-I-Y wills that get challenged more in my experience.

00ec25

Johno96 wrote: »

Thanks for your response. The property has only just been gifted for a number 'Family' reason and the current 'statistical' market value of the property is £250,000. I say 'statistical' because from what I know of the property and the remedial work required on it, the sale price will likely a good deal less than that. My Mother-in-Law is 93, so realistically I don't expect the value to inflate a great deal before her demise. We are all prepared for the possibility of IHT. But the 'Family' reasons have taken precedence. We just wanted to understand the likely CGT implications. I thought I read somewhere that CGT for a gifted property was based upon the increase in value from the time it was purchased (in the 1950's) to it's present value. I was hoping this was incorrect. Thanks again.

you now know for certain that you are going to have to do a CGT calculation at a date in the future.


you need ROBUST valuation evidence, not "statistical" flim flam and a feeling that the property does not meet the current average.


Obviously with a poor condition property that implies low value. When you sell you may have done it up first and so end up with a larger gain caused by a low start. That is a game for your conscience to play.


Get a valuation at the date of the gift done by a professional valuer who has seen the condition of the property and is willing to stand by that in front of an HMRC valuation tribunal if you get challenged for a "dodgy" CGT return. Remeber HMRC check every property CGT calcualtion against their own records (Valuation Office Agency) and act accordingly.



or think of a number, call it the value, and hope for the best, backed up by a few newspaper cuttings talking about price indicies. Good luck.