Capital gains tax

Kate38

Hi, I’m looking for some advice, please. About 15 years ago my grandmother’s house was put into a trust for me. It was held in trust for 10 years and then the title deeds automatically went into my name. Now that my grandmother is in a nursing home, I am selling the house. I have never charged her rent or made any money from the house. In addition, I will have to give my brother 50% of the value of the house once it is sold.
My question is, how do I work out how much tax I will have to pay once the sale has gone through? I never paid anything for the house and initially (on paper) all the money will come to me. I am renting my own home because I am on a low income and cannot get a mortgage on what the banks view as a second home. 

greatcrested

Why does 50% go to your brother?

Your gm put it into trust for you, not both of you. 10 years ago (when you reached age 18? 21?) it was put in your name (not joint names with your brother). I don't understand where your brother figures, unless you are gifting him 50% out of the goodness of your heart.

CGT is based on market value at time your took ownership against market value at time of sale (assuming it was never your main residence).

dimbo61

Time to speak to an accountant and a solicitor 

Kate38

Yes, I’m trying to get an appointment but it’s difficult whilst working from home and looking after my children. It’s useful to know it’s based on the past market value rather than purchase price, thank you.

xylophone

Yes, I’m trying to get an appointment but it’s difficult whilst working from home and looking after my children. It’s useful to know it’s based on the past market value rather than purchase price, thank you.

If this was a bare trust ( was it?) and you were the only beneficiary, then the CGT will be based on the difference between its value when it was gifted into Trust and its value on sale?

https://www.boltburdon.co.uk/yourlife/wealth-planning/trusts/bare-trust/

You grandmother continued to live in the property after having made the gift?

Has she only just gone into a nursing home?

Is she self funding or CHC funded?

If relying on means tested funding have there been any questions raised about the gift into Trust?

If you were the only beneficiary, why do you have to pass money to your brother?

It would certainly be wise to  take professional advice from a solicitor/ tax accountant to establish the exact position.

AdrianC

Kate38 said:

Hi, I’m looking for some advice, please. About 15 years ago my grandmother’s house was put into a trust for me.

Your grandmother gave her house to a trust, which owned the property on your behalf to stop you doing silly things with the money.

It was held in trust for 10 years and then the title deeds automatically went into my name.

Now you own it.

Now that my grandmother is in a nursing home, I am selling the house.

You could have done that at any point in the last five years.

I have never charged her rent or made any money from the house.

And that's why you haven't paid any income tax on your income from it.

In addition, I will have to give my brother 50% of the value of the house once it is sold.

Why? It's your house.

Or is it jointly owned between you?

My question is, how do I work out how much tax I will have to pay once the sale has gone through?

Apart from needing to know whether YOU own it or whether you and your brother jointly own it, that'll depend on the value at the time of the gift, and the value now. Also, on what other capital gains you have during the tax year.

I never paid anything for the house and initially (on paper) all the money will come to me.

Makes no difference. It's viewed as a gift of a certain value at the time of gifting. CGT is based on the increase in value since then. You can choose to gift half of the post-CGT monies to whoever you want, as far as the tax man's concerned... But if it's jointly owned, it's split pre-tax, so you each get your CGT allowance.

Whether the local authority will take as charitable view of your grandmother depriving herself of a very valuable asset that should be paying for her care is another question. Her neighbours shouldn't be subsidising her care - her house should be paying for it... I am renting my own home because I am on a low income and cannot get a mortgage on what the banks view as a second home. You don't live in it. That's the only relevant thing there for CGT.

And the banks are right. You've owned a very valuable residential property asset that you could have sold to help you buy a home.

Rural_Puppy

This might be a left field question, but why don't you move in and live in it? 

oldbikebloke

Rural_Puppy said:

This might be a left field question, but why don't you move in and live in it? 

a classic misunderstanding of how CGT works
will make very little difference to the CGT liability as it being your home is relevant only for the period it is your only/main home

in this case for the vast majority of the ownership period it was not their home, so the OP will always be liable for CGT on that % of the overall ownership period whether they move in now or not

Rural_Puppy

I suppose what I was driving at was that CGT liability will only arise when the house is sold. The o/p could choose to live there for many years without selling, and therefore not incurring a CGT liability. 

oldbikebloke

Rural_Puppy said:

I suppose what I was driving at was that CGT liability will only arise when the house is sold. The o/p could choose to live there for many years without selling, and therefore not incurring a CGT liability. 

obviously CGT applies only to a disposal (sales, gift,. transfer to a trust etc).
however, your plan appears to involve depriving her brother of what appears to be his 50% inheritance as OP obviously cannot afford to pay off her brother unless she sells up?

[Deleted User]

oldbikebloke said:

Rural_Puppy said:

I suppose what I was driving at was that CGT liability will only arise when the house is sold. The o/p could choose to live there for many years without selling, and therefore not incurring a CGT liability. 

obviously CGT applies only to a disposal (sales, gift,. transfer to a trust etc).
however, your plan appears to involve depriving her brother of what appears to be his 50% inheritance as OP obviously cannot afford to pay off her brother unless she sells up?

What inheritance?  Granny is still alive for starters and the trust only appears to have been set up in the OP's name rather than jointly with the brother.  Granny might have eventually wanted the house to go to both grandchildren when she contrived to deprive herself of the asset but that doesn't appear to be how things have been set up.  Maybe the OP does wish to share the equity with the brother but the OP has lost out on the FTB SDLT relief and is facing a CGT bill whilst the brother does not.