CGT on gifts

Jeremy535897

This would appear to be a gift of cash to the children who used it to buy the house that their parents subsequently lived in, assuming it is not just a sham. Depending on the precise nature of the transactions, it would either be a gift with reservation (so still in parents' estate for inheritance tax) or it will be subject to the pre-owned asset regime, which can impose income taxes on deemed rent.
From a capital gains tax point of view, the children will be treated as if they bought the property for the cash sum paid, and there will be no main residence exemption as they presumably don't live there with their parents.

saajan_12

butterflymum said:

In a similar vein, so asking here. What would happen regarding CGT in a situation where the connected person (parent/s), never actually owned the property in question? Instead, they (presumably), paid the Vendor/s for it, who in turn acknowledged sale of the property to the Purchasers (and named the then adult children of the parent/s as such), and in addition implied those Purchasers (the named adult children of the parent/parents), paid the sum in question for the property (which of course they didn't), all without the knowledge of said adult children? The Purchasers (albeit unknowingly), became Joint Owners but the parent/parents moved into and lived in the property, without paying rent to the adult children.

On later discovering all of this, if the Purchasers (ie the children), decided to sell, would their proportion of CGT also be calculated based on the original price paid to the Vendor/s by, presumably, the parent/parents?

Sounds very confused.. it cant' have been entirely without the children's knowledge, they would have had to sign the transfer deed to get the property in their name. 

The CGT can't be higher than the property value so net net they're still up - not sure what the issue is. 

sheramber

butterflymum said:

In a similar vein, so asking here. What would happen regarding CGT in a situation where the connected person (parent/s), never actually owned the property in question? Instead, they (presumably), paid the Vendor/s for it, who in turn acknowledged sale of the property to the Purchasers (and named the then adult children of the parent/s as such), and in addition implied those Purchasers (the named adult children of the parent/parents), paid the sum in question for the property (which of course they didn't), all without the knowledge of said adult children? The Purchasers (albeit unknowingly), became Joint Owners but the parent/parents moved into and lived in the property, without paying rent to the adult children.

On later discovering all of this, if the Purchasers (ie the children), decided to sell, would their proportion of CGT also be calculated based on the original price paid to the Vendor/s by, presumably, the parent/parents?

Is this an actual scenario or a made up one?

Bookworm225

butterflymum said:

In a similar vein, so asking here. What would happen regarding CGT in a situation where the connected person (parent/s), never actually owned the property in question? Instead, they (presumably), paid the Vendor/s for it, who in turn acknowledged sale of the property to the Purchasers (and named the then adult children of the parent/s as such), and in addition implied those Purchasers (the named adult children of the parent/parents), paid the sum in question for the property (which of course they didn't), all without the knowledge of said adult children? The Purchasers (albeit unknowingly), became Joint Owners but the parent/parents moved into and lived in the property, without paying rent to the adult children.

On later discovering all of this, if the Purchasers (ie the children), decided to sell, would their proportion of CGT also be calculated based on the original price paid to the Vendor/s by, presumably, the parent/parents?

so on paper the children are the legal owners of a property they have never lived in and never paid for using their own money?

Crucial question: who gets the money from the sale???????
You need to appreciate that CGT is based beneficial ownership, not legal ownership

in your scenario the children have a "reasonable" case for saying they were never the beneficial owners of the property since they never paid for it and benefitted from living in it.
HOWEVER, as (on paper) legal owners of the property, if the sales money is paid to them then that would cancel out their claim of having zero beneficial interest in the property and leave them exposed to CGT on gain in value since acquisition (actual price paid by parents who then gifted the asset to the children).
Technically the value at date of gift should be used, but your scenario implies the gift was on purchase so unlikely there was any change in value between price paid and value at date of gift.

unclear what stance you want to take:
- children refuse to accept sales proceeds and leave parents with the money (parents exempt from CGT as it appears, on info provided so far, to have been their main home for the entire time after they paid for it)

or

- children accept the money and pay the CGT