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Buying half share of house

V2001
Posts: 248 Forumite

in Cutting tax
In this example pls answer:
2 brothers live in a house together as tenants in common holding 50 50 shares each. House is worth 500k.
If one brother buys the other share out for 250k and owns it outright, do they have to apply a 15% discount for the share. Or is that only done if it was upon death for IHT.
2 brothers live in a house together as tenants in common holding 50 50 shares each. House is worth 500k.
If one brother buys the other share out for 250k and owns it outright, do they have to apply a 15% discount for the share. Or is that only done if it was upon death for IHT.
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Comments
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AIUI there is nothing suggesting the 15% discount is anything more than a 'suggestion'.#2 Saving for Christmas 2024 - £1 a day challenge. £325 of £3660
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Ok as I was advised a 15% discount needs to apply because of the difficulty in selling because someone already lives in the house, and it applies for iht.0
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Advised by who? The person owning the other half?All shall be well, and all shall be well, and all manner of things shall be well.
Pedant alert - it's could have, not could of.0 -
elsien said:Advised by who? The person owning the other half?
"In England, Wales and Northern Ireland as a matter of practice the nature of jointly owned property results in the discounting of the open market value of land or buildings. The District Valuer (DV) (IHTM23002) will report the value of the share having allowed for this ..."
IHTM15072 - Valuation of joint property: discounts for joint ownership - HMRC internal manual - GOV.UK (www.gov.uk)
The principle being that where people live in the same property as joint owners and one of them dies, but the other continues to live there, then the deceased person's "half share" cannot be worth the mathematical 50% of total value because it cannot be easily sold as the other person remains living there and could delay the sale of the whole. Therefore the part share must be worth less than 50% of the whole
in recognition of that scenario, a "discount" factor of 10 or 15% is applied depending on who the acquirer is, who is still alive and who is in occupation.
it is a rather complex area of valuation and inheritance tax with CGT implications as well
IHTM15071 - Valuation of joint property: valuation - HMRC internal manual - GOV.UK (www.gov.uk)
Inheritance Tax Manual - Section 18: undivided shares - Guidance - GOV.UK (www.gov.uk)
A discount may also be applied to other non property assets, but that is for a different discussion1 -
But in this case where no one has died does the 15% discount still apply? Or it only applies upon death0
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Surely,the brothers can agree any amount for the transfer of the share.1
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