Property ownership transfers and capital gains tax.

thor

In the not too distant future my brother and sister and I will be swapping ownership of properties that we possess. Even though no money will be changing hands we are aware there are capital gains tax implications but am not too sure what amounts will be involved. Here is what we intend to do:

Property A (owned outright)- Lived in by my brother and he bought it jointly with myself for £34000 and is currently worth about £120000. I will be transferring my 50% ownership to him. 

Property B(owned outright) - Lived in by my sister but again bought jointly by my brother and myself for £125000 and is currently worth the same. We want to transfer both our ownership to her.

Property C(owned outright) - Unoccupied and owned by my sister. She is to transfer ownership to me. Bought for £20000  and is currently worth £100000.

I will not be living in either of these properties.

So what will the tax implications be for these transfers?

[Deleted User]

Not really that complicated as it appears there are no reliefs available. 

Property A - You have a capital gain of 60000 less 17000 less half fees less half the cost at any improvements.

Property B - Both you and your brother each may have a small loss - Proceeds 62500 less cost 62500 less half fees less cost of any improvements. You can set any loss against property A.

Property C - Your sister has a gain of 100000 less 20000 less fees less cost of any improvements.

From the above gain you each have a capital gains exemption of 12300. The remaining amount will be charged at 18%, 28% or a combination of the two depending on your other income.

The capital gains must be declared and paid within 30 days.

https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

Jeremy535897

You will also need to give careful thought to the stamp duty implications, as you and your brother each own an interest in more than one property, so the additional rates may apply, and the rules on exchanges of land need to be looked at.

[Deleted User]

One thing I didn’t mention was the valuations themselves. One would require an independent valuation of each property, not simply what the op reckons is a reasonable estimate. While this is an additional expense, HMRC will appoint its own ( not sure if the process in England).

Jeremy535897

[Deleted User] said:

One thing I didn’t mention was the valuations themselves. One would require an independent valuation of each property, not simply what the op reckons is a reasonable estimate. While this is an additional expense, HMRC will appoint its own ( not sure if the process in England).

In theory, yes. In practice, they don't seem to bother very often.

thor

So taking out stamp duty and cost of indep valuations, if the figures I have given are accurate what would the tax bill be?

[Deleted User]

Property A - your tax bill is 30700 @ 28% if you are already a higher rate taxpayer - £8596

Property B - we will call it no gain nor loss 

Property C - Your sister has a bill of 67700 @28% if she is already a higher rate taxpayer = 18596.

Those are the maximum amounts. If either you or your sister are basic rate taxpayers, or don’t pay tax at all, other income figures would be required to calculate accurately.
You also can deduct any legal fees incurred both with the purchases and transfer of the properties.

justworriedabit

[Deleted User] said:

One thing I didn’t mention was the valuations themselves. One would require an independent valuation of each property, not simply what the op reckons is a reasonable estimate. While this is an additional expense, HMRC will appoint its own ( not sure if the process in England).

Get an EA valuation and if you are not happy with the first, go for a second. My family uses one EA, family knows an EA is no ones friend but their own but they do have their uses come to valuations on property you may want to gift within reason. You can send a copy of the valuation on your self assessment when you have gifted the property.