Valuation of a gifted property

fuzBear

Hi

To potentially reduce IHT, I would like to gift a share/whole of my previous main residence to my four children.

Now I know part of the gift will be sheltered by PRR and LR. But initially what will be an acceptable valuation to HMRC? Can I base it on the value the next door property was sold at? Or must get a proper valuation done, as these are not cheap?

The property is suffering from subsidence (if this matters).

Thanks

Hana

BoGoF

You will need to get a 'proper' valuation done or any value you give could be challenged later. For all you know next door sold for below market value for a quick sale.

00ec25

fuzBear wrote: »

Hi

To potentially reduce IHT, I would like to gift a share/whole of my previous main residence to my four children.

so the gift is a disposal for CGT purposes and therefore, as you appear to realise, will trigger the need to make a CGT calculation

as you mention LR then it appears you are already required to do a tax return reporting your rental income so you will be required to report this disposal as as connected person CGT "sale" to your children.

On that basis "what next door sold for" is a start point, but how do you intend to back up that assertion with documentary evidence of how directly you and they compare?

If you choose to pay for a professional valuation, the documentation produced would have (some) added credibility since it would be a) independently produced and b) backed up by a professional standing, so would have a better start in the face of HMRC scrutiny.

HMRC will subject your valuation to scrutiny given the CGT position so ideally you'd need a Chartered Surveyor who additionally holds the RICS valuation accreditation to prepare a written valuation that they will stand by when challenged.

You might also consider seeking HMRC's pre-approval by using the Form CG34 before submitting your tax return

getmore4less

Do the kids want to share a rental property, become landlords, deal with all the legalities and tax returns that will entail.

Could mess up any future property purchases for them if they don't own already.

Keep_pedalling

Why lumber your children with a shared property? sell and give them cash would seem the better option especially if any of them are not already on the property latter, where your gift would cost them dearly when they do buy their own place as they will lose their 1st time buyer status and pay the additional 2nd home stamp duty.

MEM62

Keep_pedalling wrote: »

Why lumber your children with a shared property? sell and give them cash would seem the better option especially if any of them are not already on the property latter, where your gift would cost them dearly when they do buy their own place as they will lose their 1st time buyer status and pay the additional 2nd home stamp duty.

I am seeing a lot of sense in this. Another plus point is that it saves arguments (and even potential litigation) in cases where three of your children may want to sell but the fourth doesn't.

fuzBear

Further points, the kids already manage the rental of the property (just do not received anything). The rental income funds our current mortgage. All kids are homeowners, no danger of losing 1st buy's right.

We had looked to sell it previously, but the property has subsidence.

Good point on future litigation.

HMRC said to me this morning, estate valuation is sufficient. Not sure I believe this.

Thanks on tips so far. Good food for thought.

Keep_pedalling

fuzBear wrote: »

Further points, the kids already manage the rental of the property (just do not received anything). The rental income funds our current mortgage. All kids are homeowners, no danger of losing 1st buy's right.

We had looked to sell it previously, but the property has subsidence.

Good point on future litigation.

HMRC said to me this morning, estate valuation is sufficient. Not sure I believe this.

Thanks on tips so far. Good food for thought.

You should get a professional valuation from a RICS surveyor. A house with subsidence is going to be tricky to value.

Who will be getting the rental income after the transfer? If that is still needed to pay the mortgage on your home then this would be classed as a gift with reservation so won’t help with IHT planning.

00ec25

fuzBear wrote: »

HMRC said to me this morning, estate valuation is sufficient. Not sure I believe this..

do not believe it

the only time a valuation is good enough is when inheritance tax has been physically paid the estate valuation has been reviewed by HMRC and "ascertained"
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm09243

the same principle applies to your disposal to your children before your death for CGT purposes. Your valuation has not been ascertained because it is a valuation, not a matter of record based on price paid by a unrelated third party buying it
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg16251