Crystallising lettings relief?

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A client has proposed transferring property to a family member (other than a spouse) before 5 April.  A perhaps unintended consequence is that he would 'bank' any lettings' relief before it is abolished.  Any views on what this could fall foul of would be welcomed

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Scooby
By gainsborough
27th Feb 2020 22:12

From a tax point of view, assume client is aware that this would trigger a capital gains tax charge (assuming it is not his main residence) and potential stamp duty charge if there is any actual consideration or a mortgage outstanding on the property?

From a non-tax point, what is the reason for the transfer?

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Replying to gainsborough:
Coman And Co
By ComanCo
27th Feb 2020 22:27

The client is aware of the capital gains tax. However the transfer as a gift would be eligible for lettings relief. Provided there is no mortgage, my understanding is that there would not be any stamp duty.

The base cost of the property in his brother's hands would be market value at date of transfer, and the overall gain (including that on subsequent disposal) would be be exposed to less CGT.

My client's intention is to make a gift, and not to avoid capital gains tax. However, I cannot find any specific anti-avoidance provision that indicates that lettings relief cannot be applied on the transfer of a gift, or that the relief affects base cost in the hands of the donee.

My concern is that by achieving the available tax relief for my client, I am not perceived as a promoter of tax avoidance.

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Replying to ComanCo:
By SteveHa
28th Feb 2020 08:53

ComanCo wrote:

The base cost of the property in his brother's hands would be market value at date of transfer, and the overall gain (including that on subsequent disposal) would be be exposed to less CGT.

You appear to be conflating what will be two separate transactions, the first being the making of the gift, which will crystalise a CGT liability at market value, using normal reliefs available (including lettings relief).

The second transaction will be the eventual disposal by the brother, which will be subject to whatever taxes etc. apply when that happens.

The two are completely separate, independent transactions.

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Psycho
By Wilson Philips
27th Feb 2020 23:22

Client has decided to do something unremarkable - gift an asset to a family member. You have pointed out a statutory relief that might apply as a consequence. If that is promotion of tax avoidance then we’re all stuffed.

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paddle steamer
By DJKL
28th Feb 2020 00:27

Consider IHT re the gift in the event of his estate falling into charge within seven years

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avatar
By Richard Grant
28th Feb 2020 07:45

What's the problem? The relief is there, he is not falsifying anything, just take it and be glad he's used it before it's been removed.

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Coman And Co
By ComanCo
28th Feb 2020 09:48

Thanks for your replies. The thread has confirmed my opinion. I would like to close this particular discussion.

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