Gift with reservation property

V2001

Mother gifted property to son as joint beneficial tenants. They both live in property. Apparently its a grob on mother because of the tenancy they had.

If they sell the property and get 50/50 of the proceeds, could mother buy a new property in her sole name, using her share of proceeds and does it cancel the grob, or does it follow her. Is any cgt due?
Property was gifted in 2016 at 400k. Its now worth 450k

oldbikebloke

V2001 said:

Mother gifted property to son as joint beneficial tenants. They both live in property. Apparently its a grob on mother because of the tenancy they had.

If they sell the property and get 50/50 of the proceeds, could mother buy a new property in her sole name, using her share of proceeds and does it cancel the grob, or does it follow her. Is any cgt due?
Property was gifted in 2016 at 400k. Its now worth 450k

the more common acronym is GWR
I assume neither person owns other property, or has lived elsewhere or, crucially, has a spouse living elsewhere during the 50/50 ownership period. 
If that is correct then both have lived in the property as their only/main home so there is no CGT on sale.

whilst mother lived there, the gift never took place since it was a GWR. Only now that mother and son separate will his share of the property proceeds be a  "gift" and, crucially, it is now a PET - a Potentially Exempt Transfer in respect of inheritance tax (IHT). That means for that money to be outside of her estate for IHT she must live for a further 7 years from the date they sold the property (hence this is often referred to as the "7 year rule" rather than the PET acronym).
If she does, then the money he will get (450,000 x 50%) is a tax free gift from mother to son since the gift was 50% beneficial ownership, so the increase in property value ("gain") is irrelevant 

xylophone

The son is living with mother and sharing all the bills?
https://www.taxadvisermagazine.com/article/gifting-family-home

Where the donor only gifts a share of the land, for example half of, or a floor or wing or other percentage of the family home, the reservation of benefit provisions will not apply. This is because under FA 1986 s 102B (a later amendment to the original legislation), the rules don’t apply to transfers of a share of an interest in land if both the donor and donee occupy the land together, and the donor does not receive any benefit (other than a negligible one) that is provided by the donee in some way connected to the gift.

If the parent donor and the child donee (for example) live jointly in the home after the gift then the child can’t make up for the gift by, for example, buying all the groceries or paying all the utility bills. In this case, the donor would receive a benefit from the asset he had given away and continue to be in a reservation of benefit situation. They will need to strictly split all bills fairly.

V2001

Yes they lived in there together the whole time. But because it was a gift of a joint beneficial tenancy the sharing arrangement does not apply. As joint tenants you both own the whole property 100% but as one unit. But weirdly enough on sale you get 50/50
 If it was a tenancy in common we could have had a specific share and it would not have been a GWR if we shared the bills.

Now the question is after the sale when it becomes a pet. Mother gets her 50% and so does son.
If mother buys a new house using her money only from the 50% she got and additional savings does it cancel the GWR she had. It doesnt follow her to the new property? And could the son still go and live with her if he doesnt contribute to the purchase of her new property helping to avoid a GWR and Poat charge?   But he will help pay the utility bills.... 

V2001

Does anyone have any other suggestions how i can get out of the gwr? Can i gift the property back to mother?  Any other suggestions... 

oldbikebloke

V2001 said:

Does anyone have any other suggestions how i can get out of the gwr? Can i gift the property back to mother?  Any other suggestions... 

if you do not like the answers you have been given then pay for professional advice, which will be that the GWR ended when the property was sold as it was replaced by a PET
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04071

V2001

Thanks oldbike. I agree eith what you said. Though Nothing has been done yet regarding thw GWR issue. We still both living at the property and we are just deciding in the best course of action to take. 
1. Sell the property and take 50/50. I need to know if i can live with mother or if she can live with me if we buy a house just using one of our sole names. E. G could mother live with me if i just buy a house using my funds only. She wont contribute towards purchase of new house or vice versa. Does this bring about any poat issues?

2. Can i gift the house back to her as it was originally.
Ideally we would still like to continue to live together.
Thnx

V2001

Another question if mum was to gift me the whole of property just in my name, could i then give her say a lump sum of money which she can use to help buy herself another place near by. Would that cancel out the gwr? Without poat. I would not be moving into new place with her

oldbikebloke

V2001 said:

Another question if mum was to gift me the whole of property just in my name, could i then give her say a lump sum of money which she can use to help buy herself another place near by. Would that cancel out the gwr? Without poat. I would not be moving into new place with her

you clearly have done some reading, but your scenarios are becoming wild and yes, are starting to involve POAT since the the sole purpose of that is to catch out those trying to evade GWR.
If want to explore options then sit down with an inheritance tax planner and work out how much is actually at stake in the first place. Naturally that requires your mother to understand exactly what her estate is worth.
Your obsession with "cancel the GWR" is getting in the way of your thinking.

V2001

Mothers estate is worth 750k
But problem is because she gifted as a joint beneficial tenancy she looses the rnrb to pass down etc. So hence why we looking at options to cancel the gwr even if that includes selling up. We have had advice and been told the joint tenancy is problematic. Would have been easier if it was gifted as tenants in common.
All the advice given by professionals is different to. We just need to know if we sold up took 50/50 each and mother bought a new house using her cash/savings only could i move in with her, if i dont contribute towards the purchase of the new property??

Im hoping that it avoids poat because im not contributing or purchasing the property in my name. But only problem is 50% was taken out of her estate from first house but like you said hopefuly that is seen as a PET as i will be keeping the cash in bank.