Equity Gift related question

Rubi87

Hi Everyone,

Just after some advice please. My partners sister is transferring her mortgage free property over to my partner (I think they originally got mortgage under her name as he wasn't working). However speaking to a solicitor we have been made aware that my partner may be liable to pay CGT in future if he sells. After speaking to another friend who has multiple properties we have been informed when transferring over the property they can do it is a 100% equity gift so that my partner is liable to pay stamp duty but not CGT if he sells. Does this sound right? My partner will be moving into the property. Any advice will be greatly appreciated.

SDLT_Geek

Rubi87 said:

Hi Everyone,

Just after some advice please. My partners sister is transferring her mortgage free property over to my partner (I think they originally got mortgage under her name as he wasn't working). However speaking to a solicitor we have been made aware that my partner may be liable to pay CGT in future if he sells. After speaking to another friend who has multiple properties we have been informed when transferring over the property they can do it is a 100% equity gift so that my partner is liable to pay stamp duty but not CGT if he sells. Does this sound right? My partner will be moving into the property. Any advice will be greatly appreciated.

Generally a gift of a mortgage free property to an individual would be free of SDLT, whether done by a transfer of the legal title or by transferring 100% of the beneficial interest.

As for capital gains tax, if your partner is to live in the property, then any gain your partner makes during his ownership might get relieved, depending on the rules at the time of the disposal.  His "base cost" will be the value when the property is gifted to him.

A real issue here could be the CGT bill for the sister if she has not lived in the property and has made a gain.  Her disposal would be at a deemed market value.

canaldumidi

Rubi87 said:

..... My partners sister is transferring her mortgage free property over to my partner

Was the property your partner's sister's main residence?

If yes, where is she now going to live?

If no, then a) what was the value when she bought/obtained it? and b) hat is the current value? She is likely to have a CGT liability

(I think they originally got mortgage under her name as he wasn't working).

Who is 'they'? Partner's sister & partner's sister's partner? Or your partner +partner's sister?

However speaking to a solicitor we have been made aware that my partner may be liable to pay CGT in future if he sells.

Is the property now going to be your partner's main residence?

If yes, there is no future CGT liability.

If no, who will live live there (if anyone)? There is likely to be a future CGT liability.

 After speaking to another friend who has multiple properties we have been informed when transferring over the property they can do it is a 100% equity gift so that my partner is liable to pay stamp duty but not CGT if he sells. Does this sound right?

Does not sound right.

SDLT will be due on the transfer if and only if there is Consideraition paid (ie a payment in return for the property). No Consideration (100% gift) = no SDLT

CGT is not affected by the SDLT situation. It is due on sale of any asset except a property that has been the seller's main residence.

Bear in mind also Inheritance Tax on a gift. If partner's sister gifts the property topartner, and then dies within 7 years, the value of the gift will be included in her Estate for IHT purposes (this is to avoid those about to die from gifting away their assets at the last minute to avoid IHT).

My partner will be moving into the property. Any advice will be greatly appreciated.

Ah. Then your partner will have no CGT to pay if/when he sells.