CGT computation correct ?

CGT computation correct ?

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A client and his sister was gifted (not inherited) a plot of land in April 2012 from their parents.

In October 2012 he registed his wife as joint holder again at 50:50 split - already registered before I knew.

In February 2013 the land was sold for £60,000 (assume net of costs). His sister and my client getting £30k each.

My thoughts are that there was no base cost of the initial transfer from parents (perhaps some IHT implications later)

The transfer of 50% of the asset to his wife gave her an effective base cost of £15k (approx)

On the sale he has gains of £15k less his annual exemption - his wife has effectively no gain/no loss (losing her exemption)as proceeds equal (more or less) the cost deemed past from her husband.

He is a basic rate taxpayer so CGT = 18% of the £15,000 - £10,600 = £4,400 = liability of £792

He could have reduced his tax if he had passed on say his share of the land 65:35 to his wife hence using some of her exemption and bringing down his gain to just below the exemption.

I assume this cant be backdated now with the land registry - I did think of Form 17?

Thanks in advance

Replies (3)

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By johngroganjga
27th Nov 2013 10:52

Gift from parents in April 2012 (presumably after 5 April?) will have been at market value for  CGT purposes and their children's base cost in February 2013 will have been that value - unless holdover relief was claimed - it might have been available if for example the land was farming land.  It is probably unrealistic to suggest that the value in April 2012 was not the same as it was proved to be by an arm's length sale in February 2013 so the entire gain falls to be taxed on the parents unless it can be held over and unless, and this is the tricky one, their children agree that it shall be held over!  

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By cliveth
27th Nov 2013 11:31

CGT

The transfer to his wife in October 2012 is at no gain/no loss, not market value, so this will be half of whatever value was attributable in April 2012.

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By vince8
27th Nov 2013 12:31

Is there more to this I wonder?

Its all happened in less than a year, was that the original intention I wonder? It might have been easier for the parents just to sell and give the kids the cash. There's probably more to this than you know. Was it a business asset and have you yet seen the parents CGT comp on disposal yet?

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