Capital Gains Tax guidance please

didgeridoooo

A relative of mine is faced with a CGT liability out of the blue.

I read about Private Residence Relief where it mentions relief if a "dependant relative" lived in the property when he himself did not. This would surely apply?

Thanks for any comments from those with some knowledge of the subject, which I sorely lack!

Jeremy535897

See https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65550

Keep_pedalling

I don’t believe he can claim that relief, because a) he had been gifted his share of the house by the dependant relative and b) she is a joint owner so has an interest in the property.

He won’t pay CGT on his entire share however as it was his prime residence for some of those years. Because this was done in the 70s the gain will also need to be calculated from 1982 not the actual date of the gift.

He can use the calculator on this link to calculate his gain.

https://www.gov.uk/tax-sell-property/work-out-your-gain

[Deleted User]

Is it certain that he owns half of the house? I note that it was the parents (plural) who added his name to the deeds. Did the one-third share owned by father transfer to mother upon his death? Worth checking.

Jeremy535897

Keep_pedalling said:

I don’t believe he can claim that relief, because a) he had been gifted his share of the house by the dependant relative and b) she is a joint owner so has an interest in the property.

He won’t pay CGT on his entire share however as it was his prime residence for some of those years. Because this was done in the 70s the gain will also need to be calculated from 1982 not the actual date of the gift.

He can use the calculator on this link to calculate his gain.

https://www.gov.uk/tax-sell-property/work-out-your-gain

The legislation clearly envisages a situation where only an interest in the property, as opposed to the whole property, is owned.
In full, the legislation says:

"226 Private residence occupied by dependent relative before 6th April 1988.

(1)Subject to subsection (3) below, this section applies to a gain accruing to an individual so far as attributable to the disposal of, or of an interest in, a dwelling-house or part of a dwelling-house which, on 5th April 1988 or at any earlier time in his period of ownership, was the sole residence of a dependent relative of the individual, provided rent-free and without any other consideration.

(2)If the individual so claims, such relief shall be given in respect of it and its garden or grounds as would be given under sections 222 to 224 if the dwelling-house (or part of the dwelling-house) had been the individual’s only or main residence in the period of residence by the dependent relative, and shall be so given in addition to any relief available under those sections apart from this section.

(3)If in a case within subsection (1) above the dwelling-house or part ceases, whether before 6th April 1988 or later, to be the sole residence (provided as mentioned above) of the dependent relative, any subsequent period of residence beginning on or after that date by that or any other dependent relative shall be disregarded for the purposes of subsection (2) above.

(4)Not more than one dwelling-house (or part of a dwelling-house) may qualify for relief as being the residence of a dependent relative of the claimant at any one time nor, in the case of [F1an individual and his spouse or civil partner living with him], as being the residence of a dependent relative of the claimant or of the claimant’s [F2spouse or civil partner] at any one time.

F3(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)In this section “dependent relative” means, in relation to an individual—

(a)any relative of his or of his wife who is incapacitated by old age or infirmity from maintaining himself, or

(b)his or his wife’s mother who, whether or not incapacitated, is either widowed, or living apart from her husband, or a single woman in consequence of dissolution or annulment of marriage.

(7)If the individual mentioned in subsection (6) above is a woman the references in that subsection to the individual’s wife shall be construed as references to the individual’s husband."

Why would the earlier gift (back in the 1970s) change anything?

didgeridoooo

thanks for the input above