Capital Gain Tax on council flat

Broly

My mother and I bought a council flat valued 290k for 162k, When we sell it in 5 years, I hope I can get 340k. Will I have to pay capital gain tax on 50k minus legal fees or on 178k minus legal fees?
Also, we would like for this property to be on my name only, how is the procedures and how much tax would I pay?
Many thanks

Keep_pedalling

Di you live there? Why do you want you mother to give up her security by giving her home?

Broly

Hi, I will specify. My mother will move back to her country in a few months to a year and I will help her to buy small property there, since I have plans to stay in the UK, she will give me her share. Also, I am paying the mortgage. I have lived there but I have recently moved out with my partner.

DRS1

Why don't you leaves the ownership as is and try to sell the place while your mother is still living there?  I assume she would get PPR relief for all her time owning her half and you would get it for the period up until you moved out.  I think there is a period after you move out which also counts but it keeps getting shorter so I am not sure what it is now.

Broly

Hi, thanks for the advice but we are within the 5 years period where we have to return part of the discount.
Could anyone answer the main question which is irrelevant to the questions asked previously?
It might be obvious and I think I know the answer, I just need reassurance. If I sell it and I have to pay CGT, would it be over the discount that council has given us? or only from the increase of value.

Bookworm105

as the plan is for mother to return to her (native) country then whether it is tax efficient to transfer her share to you before she leaves the UK, or for her to sell it when she is by then tax resident in her own country depends on the tax rules in her country regarding sale of "overseas" property 

She would certainly be liable for CGT in the UK for any period after she left the property, but she may also need to tax pay in her country as well. She will get full exemption for the period between date of purchase to date she moved out plus a further 9 months "grace" period (even if non UK resident by then)

if she transfers her share more than 9 months after moving out of the property she would immediately have to pay CGT on any remaining gain not covered by the exemption 

if she does transfer her share, you will ultimately face 2 lots of CGT when the property is sold.
1. gain on the share you have owned since original purchase, with an exemption for the period when you lived there plus a further 9 months "grace" period.
2. gain on the share gifted by mother based on its market value at date of gift. As that gift would take place after you moved out, that share would not be entitled to any private residence relief 

Broly

Thanks, that is helpful, however, my question is still unanswered.
My mother and I bought a council flat valued 290k for 162k, thanks to the Council discount. When we sell it in 4 years, I hope I can get 340k. Will I have to pay capital gain tax on 50k or on 178k?

Bookworm105

Broly said:

Thanks, that is helpful, however, my question is still unanswered.
My mother and I bought a council flat valued 290k for 162k, thanks to the Council discount. When we sell it in 4 years, I hope I can get 340k. Will I have to pay capital gain tax on 50k or on 178k?

read the answer above, you will pay it on 2 different gain amounts based on the respective shares held for the relevant time 

Broly

However helpful, still that is not what I am asking. Forget about my mum gifting me her half. Lets say that that will never happen.
I am talking about the council discount. It was 128.1k, I bought a property valued at 290k for  161.9k, When WE sell it I might get 340k (I hope). CGT applies on 340k-161.9k or to 340k-290k?

Bookworm105

Broly said:

However helpful, still that is not what I am asking. Forget about my mum gifting me her half. Lets say that that will never happen.
I am talking about the council discount. It was 128.1k, I bought a property valued at 290k for  161.9k, When WE sell it I might get 340k (I hope). CGT applies on 340k-161.9k or to 340k-290k?

as mentioned, the gain is the difference between purchase cost and selling price, ie: 340k-161.9k
you got a discount on purchase, but now some of that discount is part of your gain and so gets taxed 

Broly

That I know, I am not sure if it will be considered as purchase the 178.1k or the 290k. I guess the 178.1k but need reassurance.