Capital Gains Tax

Note10

Any assistance greatly appreciated as we have never been in this situation before.

I have now received £49000 from my share of my late father’s property that was jointly owned by him and my sibling’s under an agreement dating back many years. I did not pay anything towards my share so believe all the gain is liable for tax.

I have signed an agreement forwarded from the solicitor dealing with my late father's affairs gifting half of the sum to my husband.

Both of us are basic rate tax payers, both earning approx. £28000 a year.   

I have been made aware that I need to pay capital gains tax on the money, my questions are

 What is the most tax efficient way to procced with this?

 Do we both need to submit a tax return for a £24500 gain and pay CGT separately, or can I pay it all?

 How much tax will we be liable for?

 Thanks

Jeremy535897

It sounds as if you received your father's share of the property on his death. If that is correct, your base cost for capital gains tax is based on the market value of your father's share at the date of his death. It also sounds like you entered into a deed of variation to give your husband half of your inheritance. I would talk to the solicitors to understand precisely what has happened, as your actual capital gains tax liability may well be nil, as you have an annual capital gains tax exemption of £12,300, which should cover any gain arising since his death, even if you were entitled to all of it rather than half being in your husband's name.

Keep_pedalling

If any CGT is due it is all yours as the gain was crystallised when the property was sold. The tax will not apply to the whole gain, but the difference between its sale value and the value at the point it was gifted to you by your father.

just to clarify, is the £49k just from your share or does that also include an inheritance from your fathers share. If the latter the inheritance is not subject to CGT.

Note10

Thanks for the replies.
To clarify my situation my father retained a fifth share of his property, my 3 siblings and myself also had an equal share each, this agreement was set up approx. 30 years ago. I believe my father was advised to take this action to avoid having his property sold to pay for his care in his later years, as it turned out this was not necessary anyway.

My father’s will left various amounts of money to grandchildren, friends etc. and myself from his fifth share of the property and savings etc. I believe this is not liable for capital gains tax as it is classed as an inheritance.

[Deleted User]

My reading of this is that the op had a one fifth share in the property with the three siblings and Dad. The op inherited a quarter of this fifth share. Is this correct? Or did the op receive the entirety of his one fifth share? Either way there are two base costs.

Jeremy535897

It would appear that one fifth has a base cost of very little (it could be that the gain was held over), and the inherited one twentieth (or one fifth, I am not sure which) has a base cost of market value at the date of death. There is also the question of what was divided between OP and her husband. 

[Deleted User]

Jeremy535897 said:

It would appear that one fifth has a base cost of very little (it could be that the gain was held over), and the inherited one twentieth (or one fifth, I am not sure which) has a base cost of market value at the date of death. There is also the question of what was divided between OP and her husband. 

That’s what I took. In short, does the £49000 represent one-fifth plus one twentieth (which is one quarter) as I suspect, or two fifths?

Note10

The property was jointly owned by all five of us, I received £49000 (one fifth) as my share when it was sold.

I gifted half to my husband at the suggestion of the solicitor before the sale was complete.

My father moved whilst we were joint owners (with our agreement and we continued to be joint owners) and he (we) paid £76000 for the property that has now been sold in 1998.

[Deleted User]

Note10 said:

The property was jointly owned by all five of us, I received £49000 (one fifth) as my share when it was sold.

I gifted half to my husband at the suggestion of the solicitor before the sale was complete.

My father moved whilst we were joint owners (with our agreement and we continued to be joint owners) and he (we) paid £76000 for the property that has now been sold in 1998.

I think the point that we are trying to establish is the actual fractions. With your three siblings and your Dad you each owned one fifth. When your Dad passed away his four children each acquired one quarter of his fifth share - you each now owned one quarter. Is that correct?

Jeremy535897

Just dealing with the fifth, it would appear that the sale proceeds were £49,000 and the cost was one fifth of £76,000, which is £15,200 (we don't know about costs of sale, costs of acquisition or enhancement expenditure).

If the transfer to husband works, and neither OP nor husband have any other gains in the year of sale, it would appear that the gain for each of them is £24,500 less £7,600 = £16,900 gross, less £12,300 annual exemption gives a net gain each of £4,600, which at 18% (based on OP's income figures) gives tax of £828 each. (Any gain on the remaining fifth is likely to be modest.) Two points arise:

• was the timing of the gift by OP to husband sufficiently ahead of any disposal to count as a gift of the property rather than a gift of the sale proceeds? The solicitor appears to have advised on this
• was any tax paid under the requirement to report gains and pay tax within 30 (or 60 if after 26 October 2021) days of completion, assuming the sale took place after 5 April 2020?

Note10

Thanks for your help, a few more answers 

When your Dad passed away his four children each acquired one quarter of his fifth share - you each now owned one quarter. Is that correct?

When my Dad passed away the property was sold, the four siblings have now received the proceeds of the share which they owned (a fifth of the property £49000 each). My Dads share was distributed under the terms of his will to grandchildren, friends and a small portion to the four siblings, I believe this is not taxable as it is an inheritance.

Was the timing of the gift by OP to husband sufficiently ahead of any disposal to count as a gift of the property rather than a gift of the sale proceeds? The solicitor appears to have advised on this

The solicitor advised us to take this action because it would be beneficial for tax purposes, I can only assume the time scale was correct. 

Was any tax paid under the requirement to report gains and pay tax within 30 (or 60 if after 26 October 2021) days of completion, assuming the sale took place after 5 April 2020?

I have only just received the money and I am aware that I need to report the gain, but am unsure how to proceed with it. Do you think it would be worthwhile to consult an accountant to guide me through the process or is this something I could do myself?