Use of Discretionary Trust to mitigate CGT
The scenario: Husband & Wife own a house which they bought 10 years ago that they have never lived in. The house is currently let to their son. The parents wish to sell the house and pass the proceeds to their son.
As the parents are not entitled to any PPR relief the tax on the gains is going to be significant.
I have an idea in my head how to mitigate the tax but it seems too easy so I'm sure I'm missing something. Here goes'..parents transfer the house to a discretionary trust, the market value of the property is less than the IHT threshold and there has been no transfers in the last 7 years so no immediate charge to IHT. The parents elect to holdover the gain, i.e. the trust inherits the base cost of the asset, and nominates their son as the beneficiary.
After a period of time the trust passes ownership of the house to the son and again elects for holdover. The son sells the house as his PPR and incurs no CGT.
Problem, I feel the revenue could look at these as linked transactions designed to avoid tax and could overrule the use of the discretionary trusts and the holdover relief.
Should the house be held in the trust for a particular minimum period of time?
- Hobby Horse 784 8
- Non resident income. 448 20
- What sectors to target? 610 30
- FYAs on second-hand vans 255 7
- Rent a room scheme query. 189 3
- client can't/won't pay 1,936 41
- Self assesment online 994 11
- UKBA financial requirements for spouse visa 267 21
- Why do I do this every year 418 9
- Watch out self-assessment scam e-mail 304 5
- closing limited company 183 2
- VAT when selling on Amazon 98 1
- HMRC filing meltdown? 522 14
- Childcare voucher schemes 255 9
- IHT and US resident 71 1
- Limited Companies Merger 212 6
- Incidental costs of Acquisition for inherited property/shares 142 1
- Practice management 386 7
- IHT and cash gifts 254 5
- HMRC Sends Derbyshire pensioner Doug Yeomans tax demand for £4.7 BILLION! 568 13
- Form MR01 (Particulars of a charge) - does this need to be filed if you remortgage with the same lender? 933
- Underpaid VAT assessment and relation to SATR 652
- Did you realise Google will not patch android exploit ... 602
- Latest phishing scam 580
- Cashback for opening business bank acct = trading income? 416
- Auto Enrolment Questions Answered 313
- Scratch Head 242
- Loan benefit after person ceases as director/employee 237
- Sabbatical payments 199
- Negligible Value Claim 176