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POA IHT CGT

POA IHT CGT

new client problem - client was gifted house by mother in 2004 for 150k tho she continued to live in there till early this year when she went into council care home fees being topped up by the son.  house is now sold for £162k - am i right in concluding that a POA benefit should have been declared as none was, tho no tax is payable as its under the PA  (she is now 90) and that the capital gain is free under the DR conditions . also i feel it fell under gifts with reservation but as there is no money at all in the estate and client was on state benefits should i over worry 

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By LyneT
09th Dec 2011 17:05

GWROB not POAT

This is a gift with reservation rather than a gift which is subject to POAT.  As estate appears to be under nil rate band, then no IHT.

However, you do have CGT on difference between £162k and £150k.  No PPR as client did not live in property.

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09th Dec 2011 17:16

@LyneT

presumably even tho the mother lived in there i note that there is stil CGT ,  its more or less covered by annual exemeption - i think i got my head round  GWR , thank  you!

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By campbed
10th Dec 2011 12:58

Wrt to IHT, as LyneT

Wrt IHT, as LyneT indicates, IHT does not look to be payable on mother's estate including value of house; mother's gift of house in 2004 was a PET but also there was a reservation of benefit; the benefit ended at the time mother vacated the house to go into care whereupon the seven year period commenced for the gift to become a successful PET on her future death.  Was the disposal in 2004 reported to HMRC and recorded at Land Registry?

Wrt CGT,  the son owned the entirety of the house after  2004 and so the gain since then is chargeable to him; but as it was not his main residence during his ownership there was no relief (PPR) as LyneT indicates. The sales costs (estate agent and conveyancing fees) might reduce chargeable gain to less than annual exampt amount as might any capital additions he paid for since 2004 and conveyancing costs he paid at that time. 

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10th Dec 2011 10:15

thanks again

yes its prob just under annual exemption after costs

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