Inheritance gift inflation

Cookiemonsters69

If a window gives their 2 daughters a field as a gift which is separate from their main dwelling. Then in time the value of the field goes up in value within say within 3 years. Do you apply the 7 year taper on the value of the field on transfer date or the date of death? 
Thanks

Keep_pedalling

For IHT purposes the value of the gift is based on the value at the time of the gift. Taper relief only applies if the total giving exceeds the NRB (£325k) and only then to the element that exceeds that value.

Any increase in value may require the daughters to pay capital gains tax if they sell and the widow may have to pay CGT on the transfer if there is any gain between the date she first became owner of the land and the date of transfer.

If the land concerned is agricultural land then it could be exempt from IHT so gifting it might not be the right thing to do.

Marcon

Cookiemonsters69 said:

If a window gives their 2 daughters a field as a gift which is separate from their main dwelling. Then in time the value of the field goes up in value within say within 3 years. Do you apply the 7 year taper on the value of the field on transfer date or the date of death? 
Thanks

Might be an idea to get professional advice before doing anything. The answer above sets out one scenario where gifting the field might not be the best idea - there could be other ways to proceed. 

You also need to be aware of 'deprivation of assets' if the widow needs residential care in future.

Cookiemonsters69

Thank you for the advice. I will get professional advice and look into Deprivation of assets. 

Cookiemonsters69

Message from KEEP PEDALING.  Sorry I have just noticed your message. 
The field is rented to a person who has a horse on it. After transfer we are looking at building a house which is very likely.  We have to spend about £12k for soil bore holes/land assessment, architects, planning etc. 
If successful and we sell it as a building plot, what taxes would we have to pay.?
Would we be better to build it ourselves and live in it for a year then sell? Or maybe rent as an investment 
Thanks
 

getmore4less

Who will be getting the rent after the transfer?

Who will be getting the proceeds of the sale?  (with or without planning or a build)

Keep_pedalling

Cookiemonsters69 said:

Message from KEEP PEDALING.  Sorry I have just noticed your message. 
The field is rented to a person who has a horse on it. After transfer we are looking at building a house which is very likely.  We have to spend about £12k for soil bore holes/land assessment, architects, planning etc. 
If successful and we sell it as a building plot, what taxes would we have to pay.?
Would we be better to build it ourselves and live in it for a year then sell? Or maybe rent as an investment 
Thanks
 

So not qualifying for agricultural relief as far as IHT is concerned. 

CGT may be payable by the widow, and will be payable on the gain achieved by the daughters on the sale of the land. I think you would have to live in it a bit longer than a year to convince HMRC that this was not just a ruse to avoid paying the CGT. Do you actually have the finances to develop the site yourself?

If the site is actually suitable for development then the value of the land is currently much higher than a field with zero chance of planning permission, so a proper valuation would be required before the gift is made.

Cookiemonsters69

The field was purchased about 2 years ago and the value is more or less the same as there has been no formal inquiry to build and it's not on the councils building area plan.
There is no money changing hands for land transfer
 The field rent of £10p/w will go to the daughters.
We haven't got the funds to apply for planning or development as yet.
We might either sit on it for 7 years is there is no tapering if that applies. 
Or wait 3 years then draw down a percentage of my pension as I will be 55.
Or devide the field up into 2 sections. One  being the front strip of the field following the line of existing properties where we might get 2 houses. The rest sold as a horse field.
I know there is a few varieties here.
I need to look into the CGT as I didn't consider this. 
So. If the land was valued correctly before transfer then 6 months later we pay for planning etc and we get it . Then sell it. Then the mother in law dies a year later. How would it be calculated 

Keep_pedalling

Cookiemonsters69 said:

The field was purchased about 2 years ago and the value is more or less the same as there has been no formal inquiry to build and it's not on the councils building area plan.
There is no money changing hands for land transfer
 The field rent of £10p/w will go to the daughters.
We haven't got the funds to apply for planning or development as yet.
We might either sit on it for 7 years is there is no tapering if that applies. 
Or wait 3 years then draw down a percentage of my pension as I will be 55.
Or devide the field up into 2 sections. One  being the front strip of the field following the line of existing properties where we might get 2 houses. The rest sold as a horse field.
I know there is a few varieties here.
I need to look into the CGT as I didn't consider this. 
So. If the land was valued correctly before transfer then 6 months later we pay for planning etc and we get it . Then sell it. Then the mother in law dies a year later. How would it be calculated 

If the value has not changed over the last 2 years then the gift would not give the giver a CGT liability. 

As for her estate it would be the value at the time of the gift that would need to be declared r3gzrdless of what you do with the land while it is in your possession.

getmore4less

Are you expecting the MIL to die?

Massive significant impact  to any plans.

Cookiemonsters69

MIL is 70 years old and very healthy