CGT query

Newly_retired

A property purchased in 1992 by two owners as tenants-in-common in unequal shares,  is now, through inheritance, owned by five people, one of whom lives in it. The property was not bequeathed in a will as such, but formed the main asset of a grandparent, then a parent, but was not sold because a grandchild ( a vulnerable adult) still lives there, who cannot afford to buy the others out. 

It is however, likely that the majority owner, who is not a member of the family, might buy it. 

 If and when it is sold, how does CGT work in this scenario? I am out of my depth here. 

Keep_pedalling

The owners who do not live there will have a CG liability if the value of their share has risen by more than the annual exemption (currently £6k but going down to £3k next April) between the date of the death of the previous owner and the sale date. The occupant is exempt as it is their main residence.

If they sell below market value then the CG liability will be based on the market value as they will be selling to a connected person.

Newly_retired

Thanks. Sorry, more questions, please.
 If the majority owner is not a relative, are they still a connected person? I guess they are, as co-owner?
And presumably it is just whatever is over the exemption that is taxed? 

Two of them won’t be very pleased as they did not even know they were owners until very recently.
Are there any other exemptions, eg from spouse to spouse?

[Deleted User]

Newly_retired said:

Thanks. Sorry, more questions, please.
 If the majority owner is not a relative, are they still a connected person? I guess they are, as co-owner?
And presumably it is just whatever is over the exemption that is taxed? 

Two of them won’t be very pleased as they did not even know they were owners until very recently.
Are there any other exemptions, eg from spouse to spouse?

Given the questions, and with the utmost respect, you should seek professional advice. You have stated that ‘you are out of your depth’ and I would strongly advise that you do not attempt to deal with this yourself - as is potentially the case with the others who have to make declarations/ file tax returns. This is not a straightforward capital gains computation. For example, does a probate value exist at the time of each of the five owner’s acquisition? 

The fee that you pay could well save you in the long run, particularly in the event of any queries raised by HMRC. . 

Newly_retired

Thank you. I certainly do intend to take professional advice, but wanted to improve my understanding first. Solicitor? Accountant? 

[Deleted User]

Newly_retired said:

Thank you. I certainly do intend to take professional advice, but wanted to improve my understanding first. Solicitor? Accountant? 

Accountant with tax specialism. Definitely not a solicitor to deal with the tax element. 

Each of the parties will have to establish their base cost, presumably value at probate. Property improvement costs also have to be established. 

Connected persons are not connected through simply through ownership - have a read here: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14580

Newly_retired

Thanks for the help given here. This is probably not the right board to get an answer to my next question, but since there is no immediate prospect of a sale, and since none of the current beneficiaries are registered as owners, if we were to find other ways to ensure some of them get their inheritance, as cash rather than a share of the property, am I right to think they would no longer be liable for CGT when a sale happens? Not sure if this is a legal or a tax question, sorry.

Jeremy535897

You only pay tax on the sale of a property if you own all or part of it.

Keep_pedalling

Newly_retired said:

Thanks for the help given here. This is probably not the right board to get an answer to my next question, but since there is no immediate prospect of a sale, and since none of the current beneficiaries are registered as owners, if we were to find other ways to ensure some of them get their inheritance, as cash rather than a share of the property, am I right to think they would no longer be liable for CGT when a sale happens? Not sure if this is a legal or a tax question, sorry.

If the estate was never wound up and ownership never transferred to the beneficiaries then it will be the estate that would be liable for CGT if it was sold without transferring to the beneficiaries. Estates only get one allowance and are taxed at 28% so that is not a great idea.