CGT and Property Gifts

PoGee

I'm still in 2 minds about what to do. I may have already asked this question.
My rental property will incur a very large cgt if I sell so I'm thinking of doing the following - to sell my main residence to my children at a reduced price. It's valued at 300k and I would sell it to them for 100k. I would then move into my rental. I'm about 10 years away from my government pension so 50k of the money I get from my kids through their mortgages would offset the loss in rental income. 
If I do this, will I need to pay cgt (on the sale of my main residence to my children)? If my kids then sell it after doing works, would they need to pay cgt - it would be their main residence.
Also, am I correct in thinking that as long as I lived for another 7 years after the sale, that this partial gift would not form part of my estate and so not liable for IHT?

PoGee

My kids are graduates but failure to launches. One going back to Uni to do a masters but has a well paid part time job and another is in a minimum wage full time job that has nothing to do with his degree. Getting digs from them is difficult. The house is heated, the fridge/freezer is always full etc. I could probably just gift the main residence outright but they don't value what I've given them so far. They'd inherit everything anyway. They have little financial real world sense as mummy pays for it all. 

[Deleted User]

If you sell/gift the property to your children the market value will be used regardless of the consideration. They are ‘connected persons’ for CGT purposes. 

If your child subsequently sells it they will calculate the gain based on the sale price less that market value, subject to any claim for relief such as Principal Private residence.

https://www.telegraph.co.uk/tax/capital-gains/do-have-pay-capital-gains-tax-when-gift-property-2022/

Brie

It may still be considered deprivation of assets should you need assistance for care costs.  Less likely the younger you are of course for it to be a major concern but come local authorities are complete $£"$£"s this way. 

BootcamperHF

Have you done the maths?  You are looking to avoid a cgt liability on your rental property by selling an asset worth £300K for £100K thus losing out on £200K if you sold on the open market.

Whatever your cgt liability is it will almost certainly be less than any growth in value of the rental property so even after tax you would be in profit.  Where is the logic in your proposal?

In addition if you move into your rental property it only becomes your principal residence from the date you occupy it so if you needed to sell for any reason some of the subsequent gain would still be liable to capital gains tax.

Jeremy535897

The proposed sale of your main residence to your children at an undervalue incurs no capital gains tax, if it has been your main residence throughout your ownership of it. For stamp duty purposes the sale will be treated as at the price received. If the children use the property as their main residences, any gain they make (sale proceeds less market value when you transferred it, less any qualifying enhancement expenditure) is exempt. They will lose any benefits accruing from first time buying property.

Once you have survived the gift by seven years, it is ignored for inheritance tax. I cannot imagine that deprivation of assets preventing you from benefiting from council aided care home in the future is a concern of yours.

If you have owned your rental property for say 10 years, and you move into it and live in it for say 10 years, half the overall gain will be exempt for capital gains tax purposes, as it will have been your main residence for half the time you owned it.

PoGee

Thanks for replies. I have a further query -
I thought there was no CGT payable when selling your main residence? - both when selling at a lower price and when my kids sell it once it becomes their main residence.

As long as I keep my BP under control, which I'm able to do with dietary adjustments, I shouldn't need a care home. The rental is on the ground floor so it would be ideal when elderly as I have slight osteoarthritis but no sign of rheumatoid arthritis or osteoporosis thankfully. I'm active and independent.

It's not so much as losing out on 200k to save 80k, as (1) I really want time away from my adult kids and (2) the 200k would be an early inheritance for them.

Jeremy535897

Thanks for replies. I have a further query -
I thought there was no CGT payable when selling your main residence? - both when selling at a lower price and when my kids sell it once it becomes their main residence.

That's what I said, yes, if it is your main residence throughout your ownership, and their main residence throughout their ownership.

PoGee

Thanks Jeremy535897. 
It's a lot to understand. I had a quick read at the connected persons situation, which confused me as online accountants write 'you may have to pay cgt'. This is generic advice.
Main residence bought mid 1990s and has been MR 100% since purchase. Rental bought late 1980s, lived there from purchase until bought present property (mid 1990s).
I may just do renovations and put MR  on open market and gift kids portion of sale cash.

Then hibernate in my previously rented property for 7 years or more, hopefully. 

PoGee

I dislike dealing with workmen intensely, which is one reason why I thought of selling to kids. They're in their mid to late 20s.

Keep_pedalling

Why would you do this rather than sell and gift some of the proceeds?