Buying sibling out of inherited house: stamp duty and capital gains

HariM

My partner and his sibling inherited their parents' house last year (50/50 share). They've agreed that he will buy out his sibling - he previously owned a flat and has just sold it, so he's using that money to buy the other half of the family house, and it will be his only property. Our plan is to later sell my current property and his house, and buy a new home together. We have two questions that we've so far been unable to find concrete answers for:

1. Will he be liable to pay stamp duty when he buys his sibling's share? (the house is valued at approx. £540k so he will be paying his sibling approx. £270k)
2. When he comes to sell the house eventually, would he be liable to pay capital gains tax - and, if so, would he have to pay CGT on the full value of the house, or just on the half that he inherited, given that half of the house will have been bought rather than inherited?

We'd be very grateful for any advice!

newsgroupmonkey_

When he comes to sell the house eventually, would he be liable to pay capital gains tax - and, if so, would he have to pay CGT on the full value of the house, or just on the half that he inherited, given that half of the house will have been bought rather than inherited?

I can't help with #1, but surely if this is inherited and his only house, he's not liable for CGT (although could be for IHT, but then that would be due immediately). I mean, your partner could be liable for CGT if the price has gone up significantly since he/she inherited it.

theoretica

CGT will depend on what he does with it while he owns it - none to pay if he lives in it, but it will be charged (on 100%) if he rents it out and lives with you.  Inheritance resets the value for CGT and there is none to pay at the time of inheriting - there is if it increases in value before being sold and has not been the owner's main residence.

canaldumidi

HariM said:

1. Will he be liable to pay stamp duty when he buys his sibling's share? (the house is valued at approx. £540k so he will be paying his sibling approx. £270k)
2. When he comes to sell the house eventually, would he be liable to pay capital gains tax - and, if so, would he have to pay CGT on the full value of the house, or just on the half that he inherited, given that half of the house will have been bought rather than inherited?

We'd be very grateful for any advice!

1) SDLT is due based on purchase price (£270K). Is the £540K the current market value, or the probate value at date of death? If the value has increased between DOD and purchase date, CGT may be due (payable by the Estate).

Who are the Executers and has Probate been granted?

Note - I'm assuming the priperty has not been transferred by the Executers to the joint Beneficiaries.

2) If he lives in the property as his main home between purchase and sale, no CGT. If not, CGT may be due based on the gain in price, his allowance etc. This would be based on the increase in value of the whole property.

HariM

canaldumidi said:

1) SDLT is due based on purchase price (£270K). Is the £540K the current market value, or the probate value at date of death? If the value has increased between DOD and purchase date, CGT may be due (payable by the Estate).

Who are the Executers and has Probate been granted?

Note - I'm assuming the priperty has not been transferred by the Executers to the joint Beneficiaries.

Thanks for your help.

The probate value at date of death was £535k, and an identical house a few doors down sold for £530k a couple of months ago (having been on the market for £550k) so we're assuming the value hasn't risen much - but he's intending to have another valuation done before buying his sibling out. We're aware that there may be CGT payable if the value has increased, but presumably it would be his sibling who'd have to pay this, as the person who's selling their half? Probate has been granted so I believe the property has been transferred, although they still don't have confirmation from the Land Registry (I might be wrong about this last point, but I believe that's the case). My partner himself was the executor. 

canaldumidi

* you (he) need to establish who currenty owns the property: The Executor acting for the deceased, or the two Beneficiaries/siblings?

* In a situation like this, the sensible approach would be (or would have been!) for the Executors to transfer ownership to your partner. Partner pays the Estate (Executor) who pays sibling. No point transfering frst to joint ownership of the 2 Beneficiaries/siblings and then transfer again to yoru partner.

* if Estate is transferring to you, then any CGT is paid by the Estate. If property is already in joint names, CGT is paid by the owners. However with that level of value increase, CGT is probaby not an issue.

https://www.vwv.co.uk/news-and-events/blog/private-client-law-brief/capital-gains-tax-and-estate-administration