Capital gains tax on gifted house

Bazzmarshall

My parents gifted their primary residence to myself and my sister in 2006 (All Deeds, Land Registry done), on the proviso that they could live in the house until either one of them or both passed away. They have both passed away in the last 2 years and therefore as we are now selling the property I'm aware of CGT to be paid. However on the deeds all it says is that the property was worth between 100k and 200k at the time (2006). How do I get an accurate figure of what the property was worth in 2006 to work out my share of CGT?

Jeremy535897

Why did your parents do this? (I ask because there seems to be a significant downside, a capital gains tax bill, for no benefit, as the house would have remained in their estates for inheritance tax and would still have counted as theirs if there were nursing home fees to be paid, and that can sometimes mean that there is a more subtle legal analysis. There were some technical changes to holdover relief in 2006.)

The short answer to your question is that you instruct a RICS surveyor to prepare a value of your interest in the property for tax purposes at the date of the gift, based on the capital gains tax valuation rules. 

Bazzmarshall

I’m not sure why it was done to be honest, however we are where we are. Thanks for the RICS advice.

Jeremy535897

The question of what basis the capital gains tax value should be on is interesting. Normally you take into account things like the fact that the property is jointly owned (which can lead to a discount), and that your parents could continue to live there (which would potentially be a significant reduction). In this case the first item (joint ownership) would not be relevant, but the second (right to remain in the property) may be, depending on how the gift was structured.

Bazzmarshall

I clearly need some professional advice, who do you suggest? Property Solicitor, accountant?

Jeremy535897

It depends on what you want to do. If you are happy that the 2006 value is what you need, then a RICS surveyor is all you need (an estate agent should have a chartered surveyor or know one). If you want to get to the bottom of what the legal documents mean, and thus avoid any risk of submitting an incorrect return, you will probably need a solicitor who deals with trusts and estates, as I suspect there is a trust lurking somewhere in the paperwork. If you trust the solicitor involved in dealing with your parents' estates, they would be a good place to start, not least because they may have done the work in 2006. You will also still probably need a surveyor to do the actual value, but it may just possibly be that there is a tax free uplift on death (don't get your hopes up).

I should also mention that when you sell the property, if there is tax to pay, it must be reported, and the tax paid, by you and your sister, within 30 days of completion. See https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

Keep_pedalling

There could be a double whammy here. As they gifted their home away prior to July 2015 I do not believe you can claim either RNRB which would mean IHT may be payable if the joint estate exceed £650k. 

jimmo

Jeremy535897 said:

 In this case the first item (joint ownership) would not be relevant,

Why not? As far as I can see dad gifted his half share and mum gifted her half share. Separate disposals albeit done simultaneously.

jimmo

Bazzmarshall said:

I clearly need some professional advice, who do you suggest? Property Solicitor, accountant?

As Jeremy says, you could need a surveyor, solicitor and an accountant. Your problem is more likely to be in which order. The surveyor needs to know what he is being asked to value. Is it an entire house with vacant possession? Is it a half share interest in a house with vacant possession? Is it an entire house with sitting tenants paying no rent? Is it a half share interest in a house with sitting tenants paying no rents? In my working days the Valuation Office Agency (VOA) normal practice was to discount joint ownership by 10 to 20% and used The Government Actuaries Life Expectancy Tables as at the date of the gift to judge the effect on market value. I would suggest the the surveyor is the the last of the 3. You almost certainly need a solicitor to judge whether a trust was created and, if not, whether the tenants' right to occupy rent free was legally sound. An accountant who is competent in Capital Gains matters would be able to guide you through the whole process. Finding one is another matter so I amfraid you may need to judge what you have learned on here to make your own decision.
 

Jeremy535897

jimmo said:

Jeremy535897 said:

 In this case the first item (joint ownership) would not be relevant,

Why not? As far as I can see dad gifted his half share and mum gifted her half share. Separate disposals albeit done simultaneously.

Good point. I was thinking of one donor, two donees. I don't think it would affect it that much though. It may depend on the type of joint ownership.