please help does my 83 year old mum have to pay capital gains?

[Deleted User]

pennypuppy said:

The current value of the derelict property is probably 50k.

On that figure, less legal fees, there will be no CGT.

Keep_pedalling

pennypuppy said:

Oh dear, It could be. The issue is we are knocking both down and rebuilding and much of the rebuild (to first fix) is from money in mums account. Yes she will be living in a granny flat in the property.  TBH I have just struggled out of debt and am on a very low income. I have 2 adult children with real medical challenges that live with me. Therefore a big tax bill is impossible for me - I don't nor won't have it. I worked for years in the family biz for nothing, it was struggling. Thankfully it was sold before dad died and they were ok.

Thanks for the additional info, it initially sounded like she was simply transferring ownership. The plan sounds like a good one as it benefits all of you. I do think however she needs to retain part ownership for her own security, if for instance anything happened to you. 

Also make sure all of you have wills and lasting powers of attorney in place.

pennypuppy

Dads will was strange, he said his estate was for her lifetime then it should be split for his kids. (I think he always thought she would leave him, he was a hard man to live with). He had PTSD. 

[Deleted User]

pennypuppy said:

Dads will was strange, he said his estate was for her lifetime then it should be split for his kids. (I think he always thought she would leave him, he was a hard man to live with).

You can see how it benefits to provide the salient information - it has gone from disaster to a great idea in a few posts. No CGT. Your mother can relax now!

pennypuppy

Thank you both so much, sorry I was told to get to the point when nervous 2 weeks ago with someone and now I find myself being scared to say too much.I just told her whilst handing her tea so she can enjoy it now. i might end up in a caravan on the property with her in a wee house at the rate its going but to not have to move, we have rented for 30 years and moved too often - it will be a dream.

Keep_pedalling

pennypuppy said:

Dads will was strange, he said his estate was for her lifetime then it should be split for his kids. (I think he always thought she would leave him, he was a hard man to live with). He had PTSD. 

That is actually a quite a normal thing to do, it protects your children’s inheritance if the serving spouse remarries, and is even more important with second marriages were children form previous marriages exist.

Good luck with the rebuild.

Jeremy535897

If the derelict house was owned by your father when he died, and he left it to your mother, her base cost is its value at the date he died, which you have been advised was £37,500. If it was worth £50,000 at the date of gift, your mother made a capital gain of £12,500. Assuming no other gains in 2020/21, her annual exemption of £12,300 reduces the gain to £200, and as a basic rate tax payer the tax is £200 at 18% = £36. This of course depends on HMRC accepting both the £50,000 and £37,500 values. It also assumes that the house was owned entirely by your father (you said it was in his name), not jointly.

She should report the gain and pay the tax by today (within 30 days of completion), and that is not realistic, as I doubt she has a Government Gateway account. See: https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax It is a pity that she appears to be within this because of a £200 gain. Was anything at all spent on improving the property during her period of ownership?

[Deleted User]

I posted that calculation too but it seems to have disappeared. I was hoping that there would be at least £200 of legal fees!

Jeremy535897

[Deleted User] said:

I posted that calculation too but it seems to have disappeared. I was hoping that there would be at least £200 of legal fees!

Yes, I see a whole load of posts have just appeared that weren't there when I posted. The issue of legal fees is an interesting one. There will be no acquisition costs, of course, but there might be some regarding the gift.

[Deleted User]

Jeremy535897 said:

purdyoaten2 said:

I posted that calculation too but it seems to have disappeared. I was hoping that there would be at least £200 of legal fees!

Yes, I see a whole load of posts have just appeared that weren't there when I posted. The issue of legal fees is an interesting one. There will be no acquisition costs, of course, but there might be some regarding the gift.

Bearing in mind what Jeremy said about the acceptance of the valuations, £200 of legal fees would eliminate the gain and, I think 🤔, the need to report it  by today. (Pretty sure someone will confirm faily promptly). Otherwise any gain should have been reported with a fine now resulting as a result of missing that deadline.