CGT

CGT

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Can anyone comment on the following. The parents of a family gift their main residence to their four children, with all the boxes ticked for a formal transfer. The children form a LLP and adapt the residence as a small Rest Home for 6 people. If the parents then become paying tenants as part of the resdidence of the Rest Home and survive for at least 7 years, will any CGT become due ?  Your input would be appreciated, Regards Snoopy

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By Andywho is fed up
22nd Nov 2011 13:35

CGT

Are you in fact asking about IHT, as I can't see that there would be any CGT payable by the parents on the disposal of the PPR?

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Replying to ShirleyM:
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By Brakefield
24th Nov 2011 18:27

Reply to Andywho is fed up

I'm not surprised you are fed up, when fools like me use the wrong initials !  Yes I meant IHT and only realsied what I had written  after I had made the post.

From What Steve Kesby has written, and this confirms what I thought myself, on the death of the parents IHT would be payable on the property. However this leads me to two other silly questions : What is GWRB ?  and what is POAT ?  and how can they effect the issue ?

The bottom line is : Is there anyway the parents can continue to live at the property as tenants or whatever, without IHT still applying in full  on their death.

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By Steve Kesby
23rd Nov 2011 11:17

No CGT, as noted above.  It is, however, I think, a GWRB, and so remains in the parents' estate for IHT purposes.

If it's not a GWRB (and I'm pretty sure it is, but haven't checked the detail of the legislation/HMRC guidance) it will be subject to POAT, and there will be an annual income tax charge on a deemed market value "rent".  The POAT can be avoided by electing to treat it as a GWRB.

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By Steve Kesby
25th Nov 2011 10:06

Abbreviations

GWRB = Gift with reservation of benefit and POAT = Pre-owned assets tax.

As noted in my earlier responses, a GWRB is a PET but remains in the death estate (and can give rise to a further PET if and when the reserved benefit ceases) and a POAT charge (market value "rent" in this situation) arises where a donor continues to enjoy use of an asset (or a substitute asset) after a gift.  They are either/or options though.

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By Brakefield
25th Nov 2011 15:51

Reply to Steve

Hi Steve,

many thanks for your input and info

 

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