CGT and Gifts with reservation?

Londonlisa12

I know for inheritance tax purposes 'gifts with reservation' are included.
But eg if someone gifts a house say 6 years ago to their son and it's both their only residence and the only people living there,would the son be liable for Capital gains tax if he sold it after the death of the gifter?
I know it would if the receiver did not live there.
Thanks.

ggmf

I've been listening to this today in the car, might help: https://www.thisismoney.co.uk/money/podcast/article-7141349/Is-swapping-home-good-idea-pitfalls-Money-podcast.html

getmore4less

If they both live there the then the starting point would be
50% absolutely gift
50% gift with reservation.

Londonlisa12

I have been told also that the son would automatically be liable to pay CGT on the value when the transfer is made even if both have lived there for years and have no plan to sell.

Tom99

Londonlisa12 wrote: »

I have been told also that the son would automatically be liable to pay CGT on the value when the transfer is made even if both have lived there for years and have no plan to sell.

If the house is the main residence of the son then the son will not pay any CGT when they sell.
There is no CGT when the gift is made because it is the main residence of the parent.

lisyloo

Tom99 wrote: »

There is no CGT when the gift is made because it is the main residence of the parent.

Do you have a link for that please (it conflicts with other things I’ve read).

xylophone

https://www.telegraph.co.uk/financial-services/investments/inheritance-tax/can-i-gift-or-sell-my-house-to-children/

https://www.yourmoney.com/retirement/perils-benefits-signing-house-kids/

No CGT as the house gifted was the parent's PPR.

It is the offspring's PPR so no CGT when he sells if it is his PPR at the time.

But if the whole of the house is gifted and the parent remains in residence, then for the gift to be effective for IHT purposes, as far as I can see the parent would have to pay rent.

Londonlisa12

Thank you all for taking the time and trouble to reply it’s very much appreciated.

To the last reply if the value of the house and the rest of the estate is less than the IHT threshold it would not matter?

xylophone

If the value of the estate were under the IHT threshold, then there would be no liability.

If the gifting parent were ever to need means tested care, the Local Authority could look into whether there had been deliberate deprivation of assets.

Malthusian

At this point we need to ask why they want to do this. Especially if the estate is currently not subject to IHT.

What does the parent do if the son goes bankrupt and the house has to be sold to pay his creditors?

What happens Wills-wise if the son predeceases his parent?

xylophone

What happens Wills-wise if the son predeceases his parent?

Leave to a sibling/relative etc with life interest to parent?

As for bankruptcy, who knows? I suppose an elderly person (possibly even two if mother and son were both pension age) would probably be offered some LA assistance?