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Is this the correct base cost for CGT purposes

Holdover relief claim

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My client owns part of land and buildings which is used in his trading company.

He owned 15% of the L & B but following his wife passing away he now owns 30%.

100% of the land is worth £5m and his original base cost for his 15% is £50k. He inherites his wifes 15% which had a value of £750k on death.

He has now gifted his 30% share to his children and I am due make a holdover relief claim. Are my assumptions below correct in terms of the gain heldover:

Proceeds £Nil, but MV of 30% is £1.5m

Cost (£50k + £750K)  £800k

Gain £700k

My main query was that the uplift in base cost on death of his wife would also be used as part of the claim, as it would have been on a sale of the asset so I assume so?

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17th Sep 2018 08:30

I’d have thought the wife’s base cost was (assumption made) £50k. She paid that, not £750k.

Readily admit it’s not my forte though; I would have asked the question myself, just with a different starting place.

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to atleastisoundknowledgable...
17th Sep 2018 08:43

Yes it was, but she has passed away. The husband has acquired it from her estate at probate value.

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to johngroganjga
17th Sep 2018 08:51

Thanks. Everyday’s a school day!

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17th Sep 2018 08:48

I question the values - you appear to have ignored joint ownership discounts and the effect of the occupation by the company - but your calculation is correct.

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to Tax Dragon
17th Sep 2018 09:38

Tax Dragon wrote:

your calculation is correct.

TD you'd rightly berate others for making assumptions. Now you're doing it yourself.

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to Tax Dragon
17th Sep 2018 09:43

Fair comment Dragon. I apologise for my hypocrisy.

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By 356B
to Tax Dragon
24th Sep 2018 11:47

Is there a schizo dragon in the Den?

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17th Sep 2018 15:41

If land was worth £5m at date of wife's death, then her 15% would not be worth 15% of £5m, especially as even with her husband's 15% she could not[on the face it ] force a sale.
A discount of 10-15% to her pro rata share of the whole would probably be applied by the DV.
It is that discounted figure - the husband's acquisition cost for CGT -which will be his base cost on subsequent sale of that 15% share

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to Montrose
17th Sep 2018 15:48

Might the probate value not already reflect the discount? I imagine that the figures that th OP has given are not precise.

If the probate value doesn't reflect the discount, then maybe it should?

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By Jigs
18th Sep 2018 07:54

Thanks all for comments, yes, I simplified my question in terms of the values, I appreciate that discounts would be applicable but I didn't want to confuse things as my Q was mainly around the base cost to use which you have all kindly answered, so thank you.

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