Capital Gains On Inherited Property

Hillheeder

Hi,
I think I am correct in saying that there's no or little CGT to be paid if a property is left in a will and is sold quickly but my situation is slightly different. 
My mother transferred the title deeds of her house to me 8 years ago and continued staying in the house until her recent death. Am I liable for CGT as technically I
have owned the house since 2014 but my main residence was elsewhere?
Thanks for your thoughts / info.

Malthusian

Am I liable for CGT as technically I have owned the house since 2014 but my main residence was elsewhere?

No. Your mother would have been liable for CGT when she transferred the house to you, but if it was her primary residence it would have been nil. You will be liable for CGT when / if you sell it.

Unless she was paying you a commercial rent, the value of the gift will be added back into her estate as a Gift With Reservation, and Inheritance Tax may be payable on it.

She will also not benefit from the Residential Nil Rate Band as she didn't own her home at the time she died, and downsizing relief doesn't apply as she gave it away before 8 July 2015.

[Deleted User]

Malthusian said:

Am I liable for CGT as technically I have owned the house since 2014 but my main residence was elsewhere?

No. Your mother would have been liable for CGT when she transferred the house to you, but if it was her primary residence it would have been nil. You will be liable for CGT when / if you sell it.

Unless she was paying you a commercial rent, the value of the gift will be added back into her estate as a Gift With Reservation, and Inheritance Tax may be payable on it.

She will also not benefit from the Residential Nil Rate Band as she didn't own her home at the time she died, and downsizing relief doesn't apply as she gave it away before 8 July 2015.

The op is correct on the CGT. This would be payable on the difference between the sale price and the value at the time of the transfer less any costs associated with the sale less any capital improvements. The disposal must be declared and CGT paid within 60 days of the sale becoming unconditional (contract date) and subsequently declared on a Self-assessment return for that year. 

Malthusian

I may be missing something but I don't see any "sale price" mentioned by the OP. Their post suggests they still own the house.

I did say that they would be liable for CGT if they later sell it.

[Deleted User]

Malthusian said:

I may be missing something but I don't see any "sale price" mentioned by the OP. Their post suggests they still own the house.

I did say that they would be liable for CGT if they later sell it.

You could well be correct - but I took from the op, from the first sentence, that a sale was possible.  They also question if they are ‘liable for CGT’ as they have lived elsewhere  but it could well be that the query does centre around CGT becoming due solely as a result of the death of the op’s mother which, of course, it doesn’t. Perhaps we will get clarification.

Keep_pedalling

Not only will CGT be due on the sale, as this was a gift with reservation of benefit, IHT could be due on it as well especially as it was gifted prior to to the introduction of the RNRB, so that allowance is not available.

Another care home fee dodge gone wrong?

[Deleted User]

Keep_pedalling said:

Not only will CGT be due on the sale, as this was a gift with reservation of benefit, IHT could be due on it as well especially as it was gifted prior to to the introduction of the RNRB, so that allowance is not available.

Another care home fee dodge gone wrong?

Perhaps. Perhaps not. But it is certainly another example of a house, previously exempt from all taxes and now potentially giving rise  to two as a result of the transfer.

anonmoose

You still pay CGT.  I have personal experience with this issue (not as a home care fee dodge it was under different unusual circumstances).  Even if the property is inherited and a different vulnerable relative lives in the property rent free you pay CGT on the whole period.

Not sure about the IHT as our circumstances were different and IHT had already been paid on inheritance so in effect we paid tax twice, once when we inherited it and once when we sold it.

The only exemption would be if you were living in the property as your main home anytime during the period as you can deduct pro rata if its your main residence for part of the period.  

NorthYorkie

Let's be clear on this. The key question is "who was the beneficial owner of this property?" Merely transferring "the title deeds" in to the questioner's name only transfers the legal ownership (which is not the same thing under English law and is actually irrelevant for tax purposes). Of course there may have been an intention to transfer beneficial ownership at that time, in which case, the situation would be as set out above.
However, if this was merely a dodge for care fees purposes, then it might be possible to argue that the beneficial ownership was intended to remain with the mother and that the questioner merely held the legal ownership as bare trustee for her. Much would depend on the motive behind the transfer and the advice given (If any) at the time. We are given no indication of the likely CGT liability which might arise on a sale and so cannot tell whether it would be worth opening this particular can of worms.

Malthusian

However, if this was merely a dodge for care fees purposes, then it might be possible to argue that the beneficial ownership was intended to remain with the mother and that the questioner merely held the legal ownership as bare trustee for her.

It might be possible to argue all sorts of things in front of a tax tribunal, but if I was HMRC's lawyer I would argue "if they didn't intend to transfer the beneficial ownership then why on earth were they faffing about with transferring the house from the mother to herself?"
It has "care fee dodge gone wrong" written all over it, and a care fee dodge requires transferring the beneficial ownership to the children (otherwise it makes zero difference to the assessment).

And unfortunately the result of that dodge - and not doing anything to unwind it when the rules changed in 2017 - is that she loses out on the residential nil rate band.