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probably simple

Apologies to you all if I am asking a basic question but being relatively new and steering clear of IHT whilst I take my ATT (i've got ACCA) exams I normally turn away clients who ask for more complex IHT issues but I think that I know the answer to this IHT/CGT question and so would like to check my understanding if I may.

Client's parents signed their house over to him and his brother in 1997. (purchased 1986 £40k, 1997 value £60k (ish), value now £160k). Parents remained there eversince, no rent charged to parents.

Father died in 2005 and mother has lived there and still does now. Her estate only has £50k of cash and shares in it and she gets £8k of pension income pa from state and private schemes.

My client and his brother want to sell the house now and use the cash to help look after her (take it in turns with occasional stints in local care home)

What are the tax implications? As I see it there is a cgt gain for my client and his brother based on the gain since 1997 when the house was transferred in 1997 but as I said I am new to this and so am sure there are loopholes I have missed.

Looking at it, IHT would not be an issue at all as estate is minimal but it seems they transferred it to try and avoid losing it to long term care costs

I may well seek help from another local firm but in the meantime if anyone could assist it would be good.


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By LyneT
04th Jul 2012 16:20

Its a double whammy

When the parents transferred the property to children there was a disposal which was covered by PPR.  The "gift" was ineffective for IHT as it was a gift with reservation of benefit and the property remained in their estate. Although there appears not to be an IHT issue, are you sure you have included everything.  eg life insurance not written into trust, jewellry etc.

When the house was sold there would be a gain based on the acquisiton costs of children and disposal proceeds.  (Not covered by PPR)

In terms of transferring the property to avoid care home fees, it is also ineffective if that was the reason for the transfer.  If the LA discovered that the house was transferred to avoid care home charges then this would be deprivation of assets and the "gift" would be ignored.

Its no good now, but a better option would have been to transfer the property into a trust instead of outright to children.  PPR would then have been available.

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04th Jul 2012 17:24


Thanks for the reply

so i am right in thinking there is a gain now, on the children based on todays proceeds less 1997 acquisitions costs.

And a potential issue with local authorities if they claim care home costs (not the full time plan as she will live with children for most of the time)

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By LyneT
04th Jul 2012 17:45

Yes thats right, if house is sold now its sales proceeds less 1997 acquisition costs.

If the house was transferred in order to avoid means testing the transaction is ignored if she has to rely on means testing (ie for LA fees)  However, if she has £50k worth of other assets, the LA will not pay in any event until her savings go below £23,250.

If there were other reasons why she tranferred the house, then the LA cannot touch the house.  eg  If she transferred the house to her sons on the understanding that they would look after he in her old age.  Unfortunately now that her condition has worsened they may not be able to.  The LA still cannot take it into account for means testing.  Even if the sons changed their mind the LA still cannot consider it if this was the reason for the transfer.

If mum has care needs - which she must if a residential home is being considered - she may be entitled to attendance allowance.  If either of the brother's wives are looking after he for more than 35 hours per week they can claim carers allowance.

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That's a bit sexist Lynne!

LyneT wrote:

If either of the brother's wives are looking after her...

I do agree though, that looking after old ladies is definitely women's work! :)

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By LyneT
05th Jul 2012 10:28

Fair cop



I do agree though, that looking after old ladies is definitely women's work! :)


George! I am shocked!  Who is being sexist now!

Seriously though, I also should have said, they could claim CA if they were not working!

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