CGT on Gifted Property

Father gave property to his sons in 1999 and lived in it rent free until his death in June 2018.

Didn't find your answer?

The property is now to be sold for proceeds of approx. £90,000. 

Am i right in thinking that CGT would be based on the £90,000 less the market value of the property in 1999 less the current tax free allowances of £11,700 

per brother? And each brother charged at 18%/28% depending on their individual circumstances? 

Replies (15)

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By Accountant A
15th Aug 2018 16:08

When you say "market value of the property in 1999" do you mean market value with vacant possession or market value with sitting life tenant?

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By tony baker
15th Aug 2018 16:15

Market value in 1999 would be with sitting life tenant as it was drawn up through the solicitors that the father would remain in the property until his death.

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Replying to tony baker:
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By Accountant A
15th Aug 2018 16:21

tony baker wrote:

Market value in 1999 would be with sitting life tenant as it was drawn up through the solicitors that the father would remain in the property until his death.

Do you have a contemporaneous sitting tenant valuation? If so, happy days.

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Replying to Accountant A:
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By tony baker
15th Aug 2018 16:28

Now that I shall have to check up on. And if I have/haven't?

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Replying to tony baker:
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By Accountant A
15th Aug 2018 16:33

tony baker wrote:

Now that I shall have to check up on. And if I have/haven't?

If you haven't, you need to get someone to give you a credible estimate. I've no idea what the MV discount would be but I guess someone knows what kind of figure would be appropriate.

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Replying to Accountant A:
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By tony baker
15th Aug 2018 16:36

Ok thank you; much appreciated.

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By ireallyshouldknowthisbut
15th Aug 2018 17:12

If it was done via a solicitor in 1999, look out for any tax planning that happened at the time.

I don't know if you were in practice back then, but the tax landscape was quite different and there were a couple of things that occured around this time that dont now to get around GWROB's for IHT purposes. This is pre POAT for example which I think was 2004 (?) There was quite a lot done with trusts at the time too, which again has since stopped circa 2004.

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By John R
15th Aug 2018 17:48

There is a possibility that the property meets the definition of settled property in which case private residence relief may be due. See Wagstaff & Anor [2014] TC 03183 which may help although the circumstances are not identical.

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Replying to John R:
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By Accountant A
15th Aug 2018 18:10

John R wrote:

There is a possibility that the property meets the definition of settled property in which case private residence relief may be due. See Wagstaff & Anor [2014] TC 03183 which may help although the circumstances are not identical.

Thanks. New one on me.

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By Tax Dragon
15th Aug 2018 18:19

If you are right then the solicitor fouled up in 1999. More likely they didn't and you need the documentation from then to understand the tax position now.

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By m.wardle2
20th Aug 2018 17:35

We have a lot of these cases. HMRC's own manuals talk of the existence of an implied trust. If the occupier did not pay rent they are not a tenant. As a beneficiary of a trust (does not need to be written), PPR is available...

It will then be part of the estate though so pick your battle...

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Replying to m.wardle2:
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By Portia Nina Levin
20th Aug 2018 17:41

Since the gift happened after 1986, it already is part of the estate.

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By victoriamariawood
22nd Aug 2018 19:01

isnt this a gift with reservation if the father didnt pay any rent - so shouldnt the property fall into the father's estate and IHT paid in the usual way - with consideration of possible spousal joint IHT exemptions / residence additonal exmpt bands if there was also a maternal unused band ?

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Replying to victoriamariawood:
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By Tax Dragon
22nd Aug 2018 19:29

Had it been DIY planning, almost certainly. But... we have not been told when in 1999 this was. And we know solicitors were involved. So it might not be so straightforward.

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By ruth.julian
30th Aug 2018 13:19

The valuation of the property will also include its condition, so that may be useful in arriving at a MV at the date the gift was made.

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