capital gains tax and main residence

stevemort

Bit complicated but here we go.
My sister owns a property in London and looking to sell later this year, she lived there until 3-4 years ago, when due to mums illness she moved up to Scotland .. renting her  London place out and renting a place up here.
Mum passed away last April and we are at the point of signing to transfer her house to Sis and me (50:50), sister has moved into mums house (last October) to save on rent etc.
So where does this leave her CGT-wise, what counts as her main residence and might she lose any exemption, obviously big difference between 0% CGT and 28%.
Any advice gratefully received.

Keep_pedalling

What was the original purchase price and current value? When did she buy it?

stevemort

 it was a long time ago dec 2000 and I think, price then £99,000  and now approx £340,000

Bookworm105

as sister let her own house then she cannot escape CGT liability on it as it ceased to be her main home, it became the tenant's main home

you might get away with using the date the tenants moved in as the end date of her claim to main residence but if she had been renting in Scotland for many months by then anyway there is a risk she would have to count from when she actually moved out, not when the tenancy started. 

without knowing that date, then a very rough illustration of her position would be:

purchased Dec 2000 sold Dec 2024, so owned 288 months (calculate in months, not years)
moved out and let "4 years ago" (48 months)
main residence period 288 - 48 + final 9 months grace period = 249

gross gain 340 - 99 = £241,000
PRR 241,000 x 249/288 = 208,364
net gain 32,626 less CGT allowance 3,000 = 29,626
worst case scenario, all at 24% gives CGT payable = 7,110

she would be left with £332,890 from the sale of her house

Keep_pedalling

Bookworm105 said:

as sister let her own house then she cannot escape CGT liability on it as it ceased to be her main home, it became the tenant's main home

you might get away with using the date the tenants moved in as the end date of her claim to main residence but if she had been renting in Scotland for many months by then anyway there is a risk she would have start from when she moved out, not when the tenancy started. 

without knowing that date, then a very rough illustration of her position would be:

purchased Dec 2000 sold Dec 2024, so owned 288 months (calculate in months, not years)
moved out and let "4 years ago" (48 months)
main residence period 288 - 48 + final 9 months grace period = 249

gross gain 340 - 99 = £241,000
PRR 241,000 x 249/288 = 208,364
net gain 32,626 less CGT allowance 3,000 = 29,626
worst case scenario, all at 24% gives CGT payable = 7,110

she would be left with £332,890 from the sale of her house

She can also deduct selling and buying costs.

stevemort

Thanks again  for your help.
Can I pick your brains on my own situation
2008/2009 Dad dies and leaves his half of house to myself and sister. So 1/4 mine, 1/4 sister, 1/2 mums. Value of whole property approx £110,000 in 2008.
2024 mum dies, leaving her half to sister and myself. So 1/2 mine, 1/2 sister. Value of whole property £180,000 in 2024/2025.
So as house not my main residence I will owe CGT.
I seem to be being told I will owe some of it on  1/4 of CG and some at 1/2 CG.
How on Earth do you work out the amount 
HELP!!

silvercar

You’ve owned a quarter since 2008. So the gain on that will be (180-110)/4= 17,500. The gain on the quarter you inherited from your Mum will only be one quarter of the difference in value since her death, which may be very little. So overall your gain will be 17.5k. From that you can deduct your share of selling costs. So the gain could be 16k. Less 3k capital gains allowance, if not used elsewhere, so 13k taxed at your marginal rate, though the 13k could push some of it into a higher rate tax bracket.

Your sister is in a better position on this one, as she now lives in the house as her principal residence, so gets some exemptions for the time she lived there combined with the last 9 months of ownership.

My caveat would be that the value of a quarter of a property may not be a quarter of the value of the whole property, particularly if someone has the right to live in the property. I’ve seen figures of 85-90% of full value bandied around.

Bookworm105

stevemort said:

Thanks again  for your help.
Can I pick your brains on my own situation
2008/2009 Dad dies and leaves his half of house to myself and sister. So 1/4 mine, 1/4 sister, 1/2 mums. Value of whole property approx £110,000 in 2008.
2024 mum dies, leaving her half to sister and myself. So 1/2 mine, 1/2 sister. Value of whole property £180,000 in 2024/2025.
So as house not my main residence I will owe CGT.
I seem to be being told I will owe some of it on  1/4 of CG and some at 1/2 CG.
How on Earth do you work out the amount 

(A + B = your overall share of gross gain) - CGT allowance = your total taxable gain share

A ) you own 1/4 since 2008 with your share of that gain being:
(sale price - value at date of dad's death which appears to be 110,000 - costs ) x 25%

B ) purchase another 1/4 in  2024 (taking to 50% overall) with that extra share being:
(sale price - value at date of mother's death which appears to be 180,000 - costs ) x 25%

silvercar

Bookworm105 said:

stevemort said:

Thanks again  for your help.
Can I pick your brains on my own situation
2008/2009 Dad dies and leaves his half of house to myself and sister. So 1/4 mine, 1/4 sister, 1/2 mums. Value of whole property approx £110,000 in 2008.
2024 mum dies, leaving her half to sister and myself. So 1/2 mine, 1/2 sister. Value of whole property £180,000 in 2024/2025.
So as house not my main residence I will owe CGT.
I seem to be being told I will owe some of it on  1/4 of CG and some at 1/2 CG.
How on Earth do you work out the amount 

(A + B = your overall share of gross gain) - CGT allowance = your total taxable gain share

A ) you own 1/4 since 2008 with your share of that gain being:
(sale price - value at date of dad's death which appears to be 110,000 - costs ) x 25%

B ) you own 1/2 since 2024 with your share of that gain being:
(sale price - value at date of mother's death which appears to be 180,000 - costs ) x 50%

It won’t matter in this case, if the sale price is roughly the 2024 price, but your method double counts the gain on the quarter from 2024 onwards. Eg if the property isn’t sold until 2030 with a further significant gain, you are including that gain on the 1/4 inherited from Dad in both A and B. From 2024 until sale OP owns half the property, not the 1/4 from Dad plus another 1/2; OP owned 1/4 from 2008 to 2024 and then 1/2 from 2024 to sale.