CGT and Inheritence tax

Thecrazy1

Hello,
 I have an unusual question. My parents are selling their properties. Currently, my parents own one house jointly, which they bought in 1970. However, my father does not live there and he rents a flat in another county. My father also owns a house that was left to him by his mother, it is in his sole name and he inherited it in 1996. He rents this out to family from 2009. I can't quite understand the calculator for CGT etc. Should he transfer the joint house in my mothers sole name or nominate his half as his primary house? this is not tax avoidance just the best way to proceed. Thanks

oldbikebloke

bog standard question, not in the least unusual
he may not live with your mother day to day but you have not said they are permanently separated (or divorcing) therefore, as a married couple, they have one exempt main residence between them. 

you cannot nominate a property that is let as your main home, and anyway he would have had to do so within the 2 year time limit for when he first had a "combination of residences" (so nominate no later than 1998)

so which is the martial main home? That will be decided by a matter of facts and patently it is not father's sole name house as that is let, therefore the exempt main home is where your mother resides to this day.

father's sole name house is liable for CGT:
- if he lived in it after 1996, but before marrying your mother, that is important and needs to be confirmed before further advice can be given
- if he married your mother and they both lived there before moving to where she is now that also is highly relevant to further advice 
- if neither of the above apply, then tax efficiency is reduced to making her a co-owner (NOT SOLE owner) of the other property so when it sold both get a personal allowance against their respective share of the gain

AdrianC

Thecrazy1 said:

Currently, my parents own one house jointly, which they bought in 1970. However, my father does not live there and he rents a flat in another county.
...
Should he ... nominate his half as his primary house?

I presume he isn't actually UK resident, and doesn't pay income tax etc here? Then saying "Oh, yes, this house in the UK is my primary residence, honest..." is going to be just a tad disingenuous, shall we say? HMRC are very likely to raise eyebrows at that.

Thecrazy1

Thank you for your comments. 
My parents married in the 60's and lived in the joint house from 1970. My father moved into his mothers old house in 1996, although they have never legally separated and still share the bills etc in the joint property. He is a UK tax payer and decided to move to the coast in 2009, to rent, letting the sole property to his family. My parents now wish to sell both properties and move. Oldbikebloke; are you saying that both houses should be in joint names?

oldbikebloke

there is a point in tax law where "permanent" separation alters the position
https://www.gov.uk/government/publications/husband-and-wife-civil-partners-divorce-dissolution-and-separation-hs281-self-assessment-helpsheet/hs281-spouses-civil-partners-divorce-dissolution-and-separation-2016

please give a straight answer - have they separated: yes or no ?

do they share bed when together (are they "living" together when they are "together")?

Thecrazy1

In this circumstance, without being 100% sure, I would say they do not share a bed.

oldbikebloke

Thecrazy1 said:

In this circumstance, without being 100% sure, I would say they do not share a bed.

then tell your parents to get tax advice from a professional (accountant or tax adviser, but not an IFA) because there appears to be more to the story than you have given on here and tax is about precise details not vague comments

if they are not living together, then, as explained in the earlier link, their respective positions are very different to what you think it is. Your father could be facing a CGT bill since it is no longer his main home (the place he rents is his home in tax terms) and he has potentially lost the right to make spousal transfer on a no gain, no loss basis

Thecrazy1

I wasn't sure who we need to contact, so this is helpful. I think the calculation came out at about £50-100,000 so hopefully we can get some clarity.