Selling land below market price & CGT query

catshark88

I am looking into buying a small piece of land from a parent for IHT and other reasons.

My Mother paid £16k for it approx 10 years ago, it is now worth £50k and I may buy for £10k.

Does anyone know CGT/ IHT implications of this?

Many thanks for your help.

Murdina

For CGT purposes the consideration for the disposal is deemed to be the arms'length or market value price, not what you actually pay.
So your mother will have a gain of 50000-16000 = 34000; depending on the exact date she bought it there could be a very small amount of indexation allowance if she sells it to you pre 6/4/08 and there would also be taper relief on a non business asset rate which may be as much as 40% of the gain i.e. only 60% is charged but then the tax rate is 20% or 40% depending on her marginal rate (and she gets her annual allowance, if not used up elsewhere).

Or it may be better if she sold after 5/4/08 and paid tax at 18%. You can do the sums and see.

Your mother has also made a gift for IHt. This is measured as the diminution in value of her estate before and after the gift - so basically it would be the difference between market value and what you pay i.e. 40k. That would be a potentially exempt transfer now and so long as your mother survives for 7 years would drop out of reckoning for IHT.

Murdina

Taper relief will only apply if your mother has already used up her nil rate band on transfers before death.