Capital Gains Tax

eskbanker

scallysally said:

I understand the tax is due, but the reasons why the tax is due is out of our hands. Selling our home is not what we intended to do. 

Sure, but the point is that that reason is irrelevant to HMRC, they simply look at it from the perspective of whether there's been a taxable gain and aren't even slightly interested in why the sale is happening.

Jeremy535897

scallysally said:

Yes its our main home, we lived here for some years now. Adding to the value of the home at the same time, they can force a sale your right we have a child also in the property whom is 12 so assume the court take that into account. We would be without a home. I am unsure what the heirs will do with the profit assume just enjoy them at the expense of us loosing a home! 

I don't know to what extent you have discussed the situation with the heirs, but would they really want to incur the costs and acrimony of going to court to force a sale? Having said that, if they knew you approached the aunt several times to buy her share, they may not understand why it can't be afforded now.

[Deleted User]

BoGoF said:

scallysally said:

I understand the tax is due, but the reasons why the tax is due is out of our hands. Selling our home is not what we intended to do. 

Goes back to why this arrangement was put in place to start with. Some bad advice or an attempt to DIY has came back to bite I'm sorry to say.

The difference between MIL gifting the money to purchase one-third of the house and what actually happened could not be more stark. 

noitsnotme

I assume the aunt was your mother-in-laws sister?  Who are the aunts beneficiaries?  Were they closer on the family tree to the aunt than your husband was?  Is your mother-in-law one of the beneficiaries?

If anyone is to blame for the situation it is the late aunt who appears to have not been entirely truthful with you and your mother-in-law.

eskbanker

noitsnotme said:

If anyone is to blame for the situation it is the late aunt who appears to have not been entirely truthful with you and your mother-in-law.

Not sure it's valid to conclude that from what's been posted (it appears that there were undocumented assumptions made by multiple parties, unless there was something clearly defined in writing governing the basis of the shared ownership and how it would end?), but in any case it's not going to be particularly productive at this stage to try to identify a scapegoat, unless there was an advisor engaged who might hold some financial liability for poor advice.

If you were one of the aunt's children, you'd probably be less than thrilled at the prospect of a six-figure sum being left to her nephew, so it's not difficult to see why the aunt would have chosen to favour her own direct family, although again we only have what might be a small part of the picture regarding her assets....

noitsnotme

eskbanker said:

noitsnotme said:

If anyone is to blame for the situation it is the late aunt who appears to have not been entirely truthful with you and your mother-in-law.

Not sure it's valid to conclude that from what's been posted (it appears that there were undocumented assumptions made by multiple parties, unless there was something clearly defined in writing governing the basis of the shared ownership and how it would end?), but in any case it's not going to be particularly productive at this stage to try to identify a scapegoat, unless there was an advisor engaged who might hold some financial liability for poor advice.

If you were one of the aunt's children, you'd probably be less than thrilled at the prospect of a six-figure sum being left to her nephew, so it's not difficult to see why the aunt would have chosen to favour her own direct family, although again we only have what might be a small part of the picture regarding her assets....

The OP said “We approached the aunt various times to buy her third and was told not to worry, you will not be with out a home”.  And also “MIL was also under the intention that the aunt third was to be left to my husband”.  Perhaps a huge misunderstanding by someone somewhere along the line, rather than untruths being told.

I agree with your second paragraph which is why I was asking who the other beneficiaries are.

scallysally

The beneficiaries are direct family to the aunt whom will receive the proceeds from the sale of the third of her share when sold. I am also worrying that MIL is of an elderly age and ideally would like her not to be involved any further so we was thinking if we can sign her share over to my husband and any capital arising from the disposal we pay for capital gains tax. As you can imagine a massive tax bill and the worry for my elderly mother in law is not fair. Is this something we can do? She was getting very upset over the situation, i feel if we can take the pressure of the tax bill from her we can pay this ourselves and sort it.. 

I have also approached the side of the aunts (dealing with the estate) her daughter for them to contribute more towards the sale of the house, ideally picking up the costs, we have been told no!

I am trying to make the sale easy and smooth but also feel i do not want any upset for MIL. If we can make the process be on us rather than her of CGT then this is something we should do. 

noitsnotme

If MIL gifts her share to your husband it will still be a disposal and it will be treated in the same way as if she sold it.  Any capital gain will still be hers and will have to be paid within 60 days.  The tax bill would be in her name but there’s nothing stopping you giving her the money to pay for it.

There is a lot of info here - https://www.litrg.org.uk/news/gifting-property-some-tax-points-consider#:~:text=Generally%2C%20if%20you%20give%20a,the%20time%20of%20the%20gift.

If you’re relying on the sale of the house to fund MILs tax bill you’re probably better off just waiting until it’s sold and deal with her capital gain at that point.

BoGoF

As morbid as it sounds is that if MIL passes away and her share goes to you/your husband then there ia no CGT to pay. That's why it's best to do whatever it takest o not sell now, including gifting her 1/3rd share now as that has same effect.

silvercar

BoGoF said:

As morbid as it sounds is that if MIL passes away and her share goes to you/your husband then there ia no CGT to pay. That's why it's best to do whatever it takest o not sell now, including gifting her 1/3rd share now as that has same effect.

For this reason it is best to do nothing. If the aunt’s heirs want the property sold then let them approach you and let them take the lead, no need to get busy yourself. Start a conversation about you being paid back for all the extra work you have done to the property and want recompense for that.

Also the aunt could look at passing you fractional amounts each year to maximise CGT allowances. She has a  £6,000 allowance this year and £3,000 from April 2024. If the property is worth £390k, your aunt’s share is £130k assuming a purchase price of £25k, buying and selling costs of say £5k takes you to £30k so £10k each. She has a gain of £120K, so could pass 5% of her share this month and 2.5% in April. That would mean your share increasing to 40.8% and the aunt reducing to 25.8%.