Parents purchase BTL property for £103k in 2005, no mortgage. Gift it to (adult) child in 2012 (MV=c£115k). Child already home owner. Child wants to sell it to raise capital for their new business in 2016. Parents say 'Don't do that, here's the cash you need instead". Property title deeds remain in child's name but they all consider it to be back with the parents (in clients words "so, technically, the house was theirs again"!). Parents retain their own home from pre-2005 to current day.
Roll forwards to 2018, parents want to sell and find a buyer @ £121k. Child (my client) is a BR taxpayer.
Question from client: Should I a) sell it to my parents & let them deal with it all or b) sell it to the 3rd party then transfer the money to my parents?
My thoughts (well, ones that can be communicated to the client):
a) sell to parents:
i. Parents would incur 3% SDLT charge.
ii. Sale should be at £nil to avoid CGT for my client
iii. Parents would have capital gain of £121k
b) sell directly to 3rd party:
i. Can they use the £103k tax base from their parents' original purchase?
ii. CGT on £7k (£121k-£103k less £11k threshold) at 18%
iii. Gift of property remains on the IHT 7 year timeline.
(Let's ignore anything to do with rental income for now - from the lack of tax returns I can only presume that the property has been empty all of these years.)
1. Am I right with point Bi?
2. Is there anything else that I'm missing?
New email from client (daughter) "What I didn't realise is that we signed a declaration of trust when they transferred the property to my name, which names my father as the beneficial owner throughout. So it appears that its not an issue after all."