Calculating CGT on house sale

Father and son sell house, father used money to buy it for son, capital gain for father on sale??

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Hi all

Briefly: Father gives son the money to buy a house (son has no cash as is a 1st time buyer) which son lives in for 5 years as his principal private residence

House is put into joint names of father and son on the deeds to give father some security

House is sold at a profit (£20k) and son is given 1/2 the sale proceeds to buy new house and is able to get a mortgage in his own right for the new house

Question: does father have to pay CGT on the £20k or are there any reliefs available to him (other than the CGT exemption) as father has given the money to the son to help him get on the property ladder

All answers gratefully received

Thanks

Adam W

 

Replies (19)

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By johngroganjga
21st Jan 2017 16:05

If the father gifted the purchase money to the son, what did he need security for? That part of what you say makes no sense.

Then the father keeps half of the sale proceeds. On what basis was he entitled to? Was that a gift back to him by his son?

And the father's gain as a joint owner is surely only half of the £20k, not all of it. So it's covered by the annual CGT exemption isn't it?

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Replying to johngroganjga:
By petersaxton
21st Jan 2017 16:24

I think we are not being told the real story!

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Replying to petersaxton:
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By adam w
21st Jan 2017 17:55

Thanks for responding - but if you are being deliberately peevish please don't trouble yourself with any further response

Adam W

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Replying to adam w:
By petersaxton
22nd Jan 2017 10:46

I'll do what I want thank you.
What you said in your question didn't make sense.

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Replying to johngroganjga:
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By adam w
21st Jan 2017 17:53

Thanks for your speedy response but perhaps you should revisit and re-read the question
There is no mention of the word gift in the narrative
Father simply helped son onto the property ladder and in case the son got into financial problems he was advised by a qualified solicitor to put his name on the deeds
Father helped again when son was able to move on and get his own mortgage by taking back 1/2 of what he had given him in the 1st place
Yes 1/2 of 20k gain is less than the exemption - but that wasn't the question asked
Thanks for taking the time to reply

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Replying to adam w:
Man of Kent
By Kent accountant
21st Jan 2017 18:03

If you are going to get pissy with anyone who replies and attempts to help I suggest you stop being a tight [***] and go and pay for some advice.

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Replying to Kent accountant:
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By adam w
21st Jan 2017 18:18

what part of "I don't think we are being told the true story"

is helpful in any way, indeed what was the point of that reply?

As to your reply I thought the whole point of this forum was to get objective comments/help?

I'm not getting "pissy" and am not a "tight [***]" which is just as well isn't it , as so far the first responder has not read the question and the second has jumped on the "lets have a go" at any poor sod who dares to ask a question, and you have too!

Wow thanks for all your help...not!

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Replying to adam w:
By petersaxton
22nd Jan 2017 10:51

If you gave the correct information people would be able to help you. You say people are giving money all over the place but as soon as somebody refers to a gift you criticise them. You don't seem to understand the English language.

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Replying to adam w:
Portia profile image
By Portia Nina Levin
21st Jan 2017 19:01

The word "gives" in the sense of "dad gives son the money" appears twice in your question you irritating [***].

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Replying to Portia Nina Levin:
By cheekychappy
21st Jan 2017 19:01

You beat me to it. I wouldn't have been so polite.

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Replying to adam w:
Portia profile image
By Portia Nina Levin
21st Jan 2017 18:56

.

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Replying to adam w:
paddle steamer
By DJKL
21st Jan 2017 19:03

adam w wrote:

Thanks for your speedy response but perhaps you should revisit and re-read the question
There is no mention of the word gift in the narrative
/p>

If there is not what does "Father gives son the money to buy a house " mean?

What part of "gives" is not a gift?

Nobody can offer any meaningful advice without the full story clearly explained.

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Replying to adam w:
By johngroganjga
22nd Jan 2017 00:33

adam w wrote:

There is no mention of the word gift in the narrative


Yes there is. You say the the father gave the money to his son.
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Replying to adam w:
By petersaxton
22nd Jan 2017 10:49

There was no mention of the word "gift" but there was mention of the word "give".
Kent Accountant provided some good advice but if you did visit an accountant I am sure you would soon be shown the door given your attitude.

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Sparkly Orange
By Sparkly
21st Jan 2017 18:36

No there are no further reliefs available to the father beyond the Annual CGT Exemption (but his share of the profit is under that anyway)

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Portia profile image
By Portia Nina Levin
21st Jan 2017 19:00

.

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By Ruddles
21st Jan 2017 20:35

Because of the usual paucity of information we have no idea what the father's profit is.

He has no base cost and will therefore be relying on the market value of his share of the property when he acquired it from his son - which may well be less than 50% of the vacant possession value of the whole property.

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Replying to Ruddles:
By cheekychappy
21st Jan 2017 20:37

All we can confirm is that the OP's father had wished that the OP was nothing more than a duvet stain.

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Out of my mind
By runningmate
22nd Jan 2017 12:24

Do you actually mean that the father & son bought the house jointly in equal shares, father gifted the son the money necessary for the son to buy his half share, son lived in the house but father did not, they later sold it realising net sales proceeds (after legal & estate agent's fees) of £20k more than the purchase cost (i.e. purchase price plus legal fees & stamp duty), father & son each retained half of the net sales proceeds (i.e. no further gift at this stage)?
If so, the son's gain is free of tax as it is his principal private residence, but the father has a gain of £10k for the tax year in which contracts were exchanged on the sale.
Whether father has any CGT liability depends on his other gains / losses in the tax year & any losses brought forward.
There is a potentially exempt transfer for Inheritance Tax purposes from father to son in respect of the gift made at the time of the purchase (which is for half the purchase cost).
RM
P.S. (1) Next time please explain your question clearly.
(2) If you are not sure if the father & son purchased the house jointly in equal shares then go back to your client (& if necessary get him to go back to the conveyancing solicitor) for confirmation of what happened.

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