Capital Gains Tax on a property that we could not sell

Bjstanbridge

Hello
In the mid 80s my father signed over his house to us. It is registered in our name. However, to protect him his solicitor drew up a registered lease with a peppercorn ground rent for 50 years or until his death. He passed away a couple of weeks ago.
As we could have never sold the house until he passed is Capital Gains Tax only due from the period from a couple of months ago to now or from when the property was put into our names in the mid 80s even thou there was a lease preventing any sale of the property 

SusieT

I think you mean capital gains tax, but yes it will be charged from when you got the property. If it is in both your names then you would benefit from 2 allowances, but that is not clear as you refer to "us" and also to "our name" so it coule be singular or plural.

p00hsticks

I'm not an expert, but as the 'peppercorn rent' wasn't the full going rate, I think there's a possibilty that the property may also need to be considered as part of his estate for IHT purposes, as it could be considered a 'gift with reservation'. I think you need to get professional advice on this one. 

It may have been seen as a good idea in the 80's but rules and allowances have changed since then. Now the IHT allowances for leaving property to descendants are pretty generous, and there is generally a double tax whammy if you give your property away beforehand but continue to live in it until your death - CGT for them and IHT for your estate

theartfullodger

Has this house been sold since dad died? 

What evidence do you have of the value of the place when put in your names originally?  Any paperwork of improvements (not repairs) since and/or legal fees etc?

If CGT is due it must be declared/reported, AND PAID within 60 days of sale. HMRC late fees and penalties can be painful (but probably not !!!!!! much as the CGT bill..)

Think CGT will be due between when first put in your name to when next transferred/sold.. 

Bjstanbridge

Thanks, for your replies, yes of course I did mean capital gains tax. It seems a little unfair to look at it from the start as we had no say about the lease and of course could not actually sell the property. Well there will be no Iht as the property is only worth 250k and there are no other assets.

p00hsticks

theartfullodger said:

Has this house been sold since dad died? 

OP says that father only died a couple of weeks ago, so unlikely.....

sammyjammy

Bjstanbridge said:

Thanks, for your replies, yes of course I did mean capital gains tax. It seems a little unfair to look at it from the start as we had no say about the lease and of course could not actually sell the property. Well there will be no Iht as the property is only worth 250k and there are no other assets.

Not much is fair in life, its just how it is.  If your father had needed to go into a car home or a nursing home and ended up in bargain basement council care because he had no property would that have been fair?

Decisions were made for whatever reason and now there you are having to deal with those consequences.  The property is no different to if you'd bought a buy to let.

user1977

Bjstanbridge said:

we had no say about the lease 

What do you mean by that? You couldn't have entered into a lease without being involved.

martindow

If you pay CGT, you will have made a gain, of which you will keep the majority.  It's a windfall caused by the massive rise in house values over the years.

bolwin1

sammyjammy said:

Not much is fair in life, its just how it is.  If your father had needed to go into a car home or a nursing home and ended up in bargain basement council care because he had no property would that have been fair?

Decisions were made for whatever reason and now there you are having to deal with those consequences.  The property is no different to if you'd bought a buy to let.

Let me edit that for you - "If your father had needed to go into a care home or a nursing home and the taxpayer ended up having to pay for it because of a cynical attempt to circumvent having to pay for care home fees, would that be fair ?"

GDB2222

This is highly complex, and you need paid for expert advice. 

Having said that, you might qualify for dependent relative relief. This was phased out many years ago, but I think that existing properties may have been grandfathered.

The carving out of a lease was effective for inheritance tax, for many years. The loophole was closed 20+ years ago. Again, there may have been grandfathering for existing properties. You should check out the famous tax case of Lady Ingram, as this will explain what was done, plus the tax consequences.

You need to sort this allout before selling the property, in my view. 

Oh, and if your dad had a 50 year lease, his estate will still own the tail end of that.