Property Gifting

QS123

Hi All,
I was wondering what your thoughts were on my family's situation. We are in the process of consulting a IHT advisor to give their thoughts also.
We have a property of self contained flats (far over the IHT threshold), my mother lives in one and was looking at the possibility of gifting the entire property for IHT purposes to us (the two children). My mother would continue to live in one after and pay "market rent" so to speak. We believe that whilst this does reduce the IHT payable by tapering after the 'seven year rule' there are considerations to be made around CGT (we would not look to sell the property)  and income tax (we both earn over the higher tax bracket) as we would benefit from the rent income. Is this correct?

Are there any other options which people consider? Trusts or companies etc. It would be interesting to hear peoples experiences etc.
Thanks

Jeremy535897

Just looking at the capital gains tax question, if your mother owns the entire block of flats and lives in only one, there would be a disposal for capital gains tax by your mother at market value at the date she gifted it. The gain on the flat she lives in (assuming it is her main residence and always has been throughout her ownership) would be exempt.

You are also correct that the market rent paid in future would be assessable to income tax. Furthermore, if the rent paid is not entirely commercial throughout the rest of your mother's occupation, there will be a gift with reservation. It may be better to split the title and your mother would keep her flat she lives in, but without any further details, it is hard to know.

oldbikebloke

if it is a Gift With Reservation (she will be living in one) then it is a GWR not a PET - Potentially Exempt Transfer (aka "7 year rule")
You are however correct that to defeat a GWR she must pay market rent for the entire period she remains living there after giving it away (no "so to speak about" that, either it is market rate or it isn't).
Only when she moves out would the GWR end and a PET clock commence ticking

you are of course correct that income tax would be due from you on those rental receipts 

more fancy schemes to avoid IHT are best left to the paid adviser you say she will be seeing as that person will have full facts to hand