Can I avoid CGT?

RosieAnn

Hi, 

I hope I have posted in the right section.

I have a rather unique situation. Sorry in advance for long post so please be patient !

My partner’s mother -called N- lives in a flat, which is owned by her mother (my partners grandma- call her . B lives abroad and is a non UK resident. N is planning to move in with her new partner - call him S. S is in the process of selling his house and then will look to buy a house for both himself and H. He won’t have enough money from the sale of his house to do a cash purchase so will need to get a mortgage.He is 60 so a mortgage is not impossible but I imagine it will be difficult. He plans to work for another 10 years

N (my partner’s mother) has no money to contribute to the new house. She doesnt earn much money and doesn’t have much of a pension. 

My partners grandma is happy to gift the house to N. We have looked into the implications of gifting. 

The reason behind gifting the flat is essentially to give my partners mum some financial security. In view that N has minimal savings and a poor pension currently. She can then sell the flat and use the cash to contribute to her new house and to provide money for savings which can be used as her pension.  

From my understanding N will be liable to CGT of the flat, if gifted to her. The flat was bought around 10 years ago for £190k and now is worth around £300k. From the online calculator - CGT would be around £20K. I appreciate that if the grandma was to pass away in the next 7 years - N would be liable for Inheritance tax. However I don’t think she would meet this as grandmas assets are below the threshold < £325k. 

Essentially my question is - is there any way of avoiding CGT? 

I have tried to do some research online but not 100% certain, as the flat is currently owned by a non UK resident.

Would be grateful for any guidance … appreciate I probably need to speak to a tax specialist ! 

[Deleted User]

Long read but what jumps out first - B will be liable to CGT, not N. It is the person making the gift who pays CGT, not the recipient. Not sure what you mean, therefore, when you say that you have looked into the implications of gifting.

So - really it makes no difference whether B gifts the house to N or sells it herself and gifts the proceeds to N- both are disposals at market value. I really can’t think how to mitigate. Additionally there is the issue regarding the declaration of the gain in B’s own country - where is that? Clearly this is something that you hadn’t considered given that you presumed N to be the person with the CGT exposure.

Additionally - it is B’s estate that would be liable for IHT, had there been any.

Grumpy_chap

N
B
S
H - who's H?

Very hard to read in code.

AIUI, if the grandmother gifts the house to the mother, then the grandmother is liable for CGT on the growth in the value of the house since the grandmother moved out (or since the property was purchased if the grandmother never lived there).

With regard to IHT, if the grandmother has total assets <£325k and gifts the £300k house to the mother, that leaves the grandmother with <£25k.  Is that realistically enough for her to live on forever?  What if she needs care fees or such like?

[Deleted User]

Grumpy_chap said:

N
B
S
H - who's H?

Very hard to read in code.

AIUI, if the grandmother gifts the house to the mother, then the grandmother is liable for CGT on the growth in the value of the house since the grandmother moved out (or since the property was purchased if the grandmother never lived there).

With regard to IHT, if the grandmother has total assets <£325k and gifts the £300k house to the mother, that leaves the grandmother with <£25k.  Is that realistically enough for her to live on forever?  What if she needs care fees or such like?

I took H to be close to N - at least on the keyboard.

RosieAnn

purdyoaten2 said:

Long read but what jumps out first - B will be liable to CGT, not N. It is the person making the gift who pays CGT, not the recipient. Not sure what you mean, therefore, when you say that you have looked into the implications of gifting.

So - really it makes no difference whether B gifts the house to N or sells it herself and gifts the proceeds to N- both are disposals at market value. I really can’t think how to mitigate. Additionally there is the issue regarding the declaration of the gain in B’s own country - where is that? Clearly this is something that you hadn’t considered given that you presumed N to be the person with the CGT exposure.

Additionally - it is B’s estate that would be liable for IHT, had there been any.

Sorry for the confusion with letters - it does not help.

Essentially my partners grandma - owns a flat which my partner mother lives in. The grandma has never lived in the flat. She lives in Jordan. My partners mother wants to move in to a new house with her partner. She doesn’t have any assets/savings - so we were thinking of ways to give her money. We thought selling the flat and giving the money to her would be a way.

Thank you for explaining it to me more
clearly. Essentially you are saying…. the grandma will have to be CGT, even if she sells
it or gifts it. So I suppose there is no point in gifting it … if the end goal
is to sell the flat. Unless there is any benefit of gifting the flat to the mother ??

The grandma has her own savings in Jordan which she lives off . I didn’t include this in her estate as I thought IHT would be only based on her UK assets/estate? But perhaps I am mistaken?