Gifting a Property and CGT vs IHT

Gifting a Property and CGT vs IHT

Didn't find your answer?

Someone told me that if an investment property is gifted from parents to their offspring, then it can be structured so there is no CGT on the gift itself, and then if the parents survive 7 years, there is no IHT either.

This seems wrong to me. I cant see the government being so generous and it being so easy to get around IHT.

Can anyone clarify if this is right.

Thankyou
Peter

Replies (7)

Please login or register to join the discussion.

avatar
By wdr
12th Jan 2007 09:42

Not impossible if value is less than £570,000 and property is jo
Each parent has a 'nil rate' band of £285,000. assuming neither parent has made any taxable gifts[whether PET's or not]in the preceeding 7 years, If no exempt gifts have been made eitherthen theoretically the value gifted could be increased by £6000 for each parent, a total of an extra £12000. Transfer of the property by way of settlement in favour of offspring will be subject to life time IHT rate.
If the value gifted is below the nil rate band for the joint donors, then the IHT payable is nil., Because it is a taxable transfer parents can claim holdover relief under TCGA s260(2)(a). That would not apply to that part of the gift identified with the annual exemptions, but the CGT attributable to that part of the gift will probably fall within the indivduals' annual CGT exemptions
Similarly a transfer out of the settlement at least three months later can be made free of CGT under s 260.

One caveat. Main residence relief cannot be claimed on the heldover gain by the offspring because of TCGA s226A.
There should be no SDLT on the transfers into or out of the settelement

Thanks (0)
avatar
By martinfoley07
12th Jan 2007 10:51

yes, it is that "simple"
if it is gifted without reservation, and they survive 7 years, it is IHT free. Value of property per se is not an issue under those circumstances.
Nor does a gift such as you describe attract CGT at the time of the gift.

Twas ever thus. (in fact, used to be "better" because the "reservation" point was introduced to stop folk continuing to live in a property they no longer owned yet avaoiding IHT).

But of course there are such things as family spats, and the gift has gone from the parents, they cannot reclaim it if they don't like the offspring's new partner etc etc., they cannot claim any rights to property income etc etc

Thanks (0)
avatar
By wdr
12th Jan 2007 11:51

Martin's comment about family spats can be managed
If parents constitute themselves +A.N .Other as trustees and don't appoint the trust assets outright to the offspring . They will probably want to appoint out before the tenth anniversary of the original trust to avoid a decnnial IHT charge

Thanks (0)
avatar
By AnonymousUser
12th Jan 2007 18:04

Does the initial tfr have to be through a discretionary trust.
Thanks for all the info guys.

I've followed up some of the points raised on the internet and it seems as if gifts of non-business assets would only qualify for holdover relief if transacted through a discretionary trust.

Is this a correct understanding of the situation?

Thanks (0)
avatar
By wdr
13th Jan 2007 22:11

A discretionary trust is no longer necssary to achieve the desir
An interest in possession trust created after 22nd March 2006 is also treated as a 'relevant property' trust so a transfer to it is chargeable to lifetime rates of IHT-indeed the same would be true of assets transferred since that date to a pre-existing IIP trust.

Thanks (0)
avatar
By AnonymousUser
16th Jan 2007 22:34

is there Stamp Duty
If the property is simply gifted and the transaction recorded with land registry, is Stamp Duty payable by the donee?

Thanks (0)
avatar
By User deleted
17th Jan 2007 09:25

There is no SDLT payable on a simple gift
with the exception of a gift to a body corporate controlled by the donor and or his or her aassociates.

So a gift to trustees wil not give rise to an SDLT charge at all

Thanks (0)