Gift of property & improvements

Gift of property & improvements

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Here's a client's situation

His father is the official owner of his half share of his property (other half owned by his wife) This was done as at the time client was unable to obtain a mortgage.

Since this transaction there have been extensive renovations to the property, paid for by my client and his wife (not the father - 50% owner)

Now time has come for the father to transfer his ownership share to my client.

This obviously triggers a CGT issue at market value for the father.

The market value will be higher than cost mainly due to the improvements carried out.

Are we able to include a share of the improvements in a CGT comp for the father despite the fact they were paid for by my client and his wife?

I'm thinking not.

Replies (3)

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By Duhamel
24th Oct 2014 20:36

TCGA section 38
I have looked at TCGA s38 regarding expenditure to enhance the value of the asset incurred by him or on his behalf.

I would argue that expenditure incurred on his behalf covers this scenario, so the father can claim his share of the improvements, but I welcome the opinion of others.

Incidentally, what is the value of the fathers share?

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By chicken farmer
25th Oct 2014 00:08

'Official owner'?
What do you mean? He is either the legal owner or the beneficial owner you need to establish which. Who actually paid the mortgage? If the son then I suggest father is not beneficial owner and therefore there is no CGTdisposal

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By King_Maker
25th Oct 2014 09:48

If the father was merely a loan facilitator (with no beneficial ownership), the transfer of his 50% of the legal title should not be a disposal for CGT.

I recommend appropriate documentation to resist any HMRC (or family) challenge at a later date.

I assume the lender has approved this transfer?

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