Splitting & Gifting A Property

trickydicky802

da_rule wrote: »

The internal door is also a new fact. I assume this will be bricked up if you do gift the property so that you don’t have free reign over it anymore.

I've wondered about whether this would be actually necessary, though it would be easy enough to do.


But since the door is lockable from both sides, isn't that equivalent to a brick wall? (OK, not as robust, but you get my point?).



What if two friends who owned each half of a semi-detatched house decided to knock a doorway in their party wall? Would that suddently render it as one dwelling (in a legal sense)?

trickydicky802

Mojisola wrote: »

You can't have it both ways - either they are one property or they are two separate properties.

The two council tax bills means it would be very hard to argue that they are one property.

I take your point, and that's part of what I'm trying to understand. The property is all one physical building and every part of it is internally accessible, suggesting that it's one single dwelling.


The two council tax bills were already in place when we bought the place so I don't fully understand the history about this. I think part of the house may have been rented out by the previous owner, though I don't know exactly how this this would have generated the separate council tax assessment.


But that's where I am today - one fully interconnected property with two council tax ratings!

trickydicky802

davidmcn wrote: »

You've been given accurate advice about the CGT rules, I'm not sure why you're arguing about them.

They can figure out their tax liability in advance of the transaction, and maybe not give it away for nothing if they're short of cash?

I'm not arguing about them, just trying to understand them and how they work in practice. I suppose houses are the usual assets when considering CGT but I've never heard of CGT applying to other gifts before - probably because most 'normal' gifts would fall under the CGT exemption allowance and so this sort of gifting 'just happens' and no one bothers to think about the possible tax implications.

Keep_pedalling

trickydicky802 wrote: »

I'm not arguing about them, just trying to understand them and how they work in practice. I suppose houses are the usual assets when considering CGT but I've never heard of CGT applying to other gifts before - probably because most 'normal' gifts would fall under the CGT exemption allowance and so this sort of gifting 'just happens' and no one bothers to think about the possible tax implications.

CGT would apply to other non cash gifts, but is easier to dodge when we are talking about liquid assets. If I want to make a gift of shares you can do across a number of years making use of your annual allowances.

trickydicky802

Keep_pedalling wrote: »

CGT would apply to other non cash gifts, but is easier to dodge when we are talking about liquid assets. If I want to make a gift of shares you can do across a number of years making use of your annual allowances.

Could a valuable physical asset also be gifted over a number of years by only gifting a 'portion of ownership' under the annual allowance?


For example, say you bought a painting for £5k some years ago that's now worth £20k, thus there will be a CGT liability on disposal. Is it possible to gift only a 50% share in its ownership one year (thus keeping below the annual CGT allowance and the other 50% in another tax year?


Or would such a thing fall foul of the rules about being a type of transaction purely to avoid a tax liability?

Mojisola

On your new thread you say "The entire property has a single legal title, duly registered at land registry."

As that's the case, how are you going to give your son the cottage?

trickydicky802

. . . by splitting the title into two separate ones, which is what this thread is all about!

getmore4less

I see you ignored a relevant part of one of my previous post

HMRC manuals have a section on pre owned assets read that while you update yourself on how CGT works.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm44000

00ec25

trickydicky802 wrote: »

Could a valuable physical asset also be gifted over a number of years by only gifting a 'portion of ownership' under the annual allowance?


For example, say you bought a painting for £5k some years ago that's now worth £20k, thus there will be a CGT liability on disposal. Is it possible to gift only a 50% share in its ownership one year (thus keeping below the annual CGT allowance and the other 50% in another tax year?


Or would such a thing fall foul of the rules about being a type of transaction purely to avoid a tax liability?

yes, it is possible to fragment an asset into parts so that you then dispose of shares/parts of the asset over a number of years and thus remain under the CGT allowance in any one single tax year

the technical term used is fragmentation
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg18150p

trickydicky802

getmore4less wrote: »

I see you ignored a relevant part of one of my previous post

HMRC manuals have a section on pre owned assets read that while you update yourself on how CGT works.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm44000

If I did then it wasn't deliberate, just something I missed through not being fluent in CGT issues. If I was then I wouldn't be here.

Anyway, I'm now thinking that there are no CGT issues arising because the entire property is one single title so all of it must be my main residence.
https://forums.moneysavingexpert.com/discussion/6037731

However, I now understand that if I were to split it into two titles then this could be problematic for my son if he inherits the property as two legally separate properties, because then he wouldn't be able to occupy both of them as his main residence, giving rise to potential CGT liabilities in the future . . . . unless, of course, he was to re-join them into one single title again! (no, let's not go there! )