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Dependent relative relief on sale of property

PPR relief due

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Hi

I have a client whose mum transferred the parents home to her children when her husband passed away in 1986.

The property value increase has led to a significant gain since that time but looking up the rules it seems that the client can obtain dependent relative relief as the house was signed over before 1988. The mum lived there rent free until she passed away last year and the house has since been sold (without anyone else living there).

My reading of the rules is that the client qualifies for the relief and is entitled to £40,000 lettings relief (the total gain is approx £500,000).

The question I have (apart from am I correct so far) is that the property was signed over to three of the children so I assume that the £40,000 relief is deducted on the gain before splitting the proceeds between the three children rather than they get £40,000 each? So if the gain was £500,000 for example then after the relief there is £460,000 split three ways giving them a taxable gain of £153,333.33 each?  

 

Replies (10)

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By chicken farmer
14th Nov 2019 17:21

Why do you think lettings relief is due when mother lived there rent free and the house was not occupied after her death??
Am I missing something?

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By Tax Dragon
14th Nov 2019 17:45

Sorry, but if, having looked at the rules, that is your answer - you really ought to get someone else involved.

There's not much info to go on, but 1986 was a critical year in the life of the nation's capital taxes regime, so you could find there's a double benefit of making that someone else a someone that knows about capital taxes.

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By Jakarmi
14th Nov 2019 18:24

It would be private residence relief (up to the mum passing away) that would apply I think rather than lettings relief from what you say.

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Replying to Jakarmi:
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By Wanderer
14th Nov 2019 18:55

Quote:

It would be private residence relief (up to the mum passing away) that would apply...

What's the basis for that?
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Replying to Wanderer:
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By Jakarmi
14th Nov 2019 19:15

Quote:

Quote:

It would be private residence relief (up to the mum passing away) that would apply...

What's the basis for that?

Unless I'm missing something - https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65579

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Replying to Jakarmi:
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By Tax Dragon
14th Nov 2019 19:18

You may be missing something. If the 1986 transfer was done under advice, the position may be better than that.

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Replying to Jakarmi:
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By Wanderer
14th Nov 2019 19:37

Was wondering if the final period of ownership (as under 18m) qualified as well?

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Replying to Wanderer:
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By 356B
18th Nov 2019 12:35

It seems so.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65560
(But as the whole gain is exempt, isn't it irrelevant?)

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By The Dullard
18th Nov 2019 13:12

When in 1986? Before 18 March 1986 or after 17 March 1986? What was the exact sequence of events? Is there in fact a gain? Probably not relevant, but was the position reconsidered post FA-2004? I'd have expected somebody to have at least given it some thought at that stage. There's a bit of a factuum though.

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Replying to The Dullard:
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By Tax Dragon
18th Nov 2019 13:50

Quote:

Probably not relevant...

~4:1 against, I reckon.

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