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Series of part disposals of one house over 4 years ... Is this one CGT disposal in year one?

Series of part disposals of one house over 4...

The financial advisor of one of my clients has advised her to split the disposal of a property to her children over 4 years, transferring 25% of the title each year, so that she can take advantage of 4 annual CGT allowances (c.£44k). My question is, which of the following is right?

A. It's perfectly kosher

B. It's tax evasion

C. It's heavy-handed tax avoidance

The value of each annual 25% part-disposal would be adjusted each year to reflect the value of the totality of the property in each successive year. So the 25% gain in year one might be £45k, in year two it might be £50k, etc, and each year the client just reports in her tax return the 25% part-disposal capital gain less the annual £11k CGT allowance. This way she gains c.£44k CGT allowances over four years against the disposal of just one property.

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By JimFerd
01st Mar 2016 12:38

I don't think there's a problem with it.

The linked transaction rules apply to SDLT, which doesn't appear to be in point here - assuming that there's no consideration.

There's also some 'series of transaction' rules that apply to CGT, but they relate to valuation issues and apply more to shares etc.

So assuming that there's no consideration, that your valuation is correct and you have applied the part-disposal rules correctly, then splitting the transaction between several years is fine.

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01st Mar 2016 14:50

Valuation SDLT and IHT issues

How is joint ownership over the four years going to be documented.?

It is not clear if this is an investment property, or client's main home. If the latter, this will be a GROB for IHT.

If a investment property, income must follow ownership of course.

The valuation of the gifts for CGT will be an exercise in property valuation, valuing each transfer at the time. HMRC may well refer each gift to the DV, so this could be a long drawn out exercise.

For IHT, a completely different valuation is required, ie loss to the estate of the donor. I believe the two valuations will coincide on the last gift.

Worth doing, but not as straightforward as it seems .

If  the property is residential, and any of the children wants to move or acquire a first home he or she will immediately have to pay the 3% SDLT surcharge on their proposed acquisition as soon as even a 25% share in the property has been transferred.

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