Hi All,
Although I work in practice, I mostly deal with corporate taxes, so this may be a simple question for some of you, in which case I apologise!
If a parent is gifting rental property to their (adult) child, is it possible for the child to then gift the parent the money due for the CGT liability? I have been unable to find any guidance stating this isn't allowed, but if anyone is aware of any restrictions I'd be very grateful.
The property is owned outright, so I believe that no SDLT would be payable by the child.
It's always been my understanding that the gift would be a PET and that IHT would not be due unless the parent died within 7 years, but I have read a few articles which suggest transfers of property valued over the £325,000 NRB may attract 20% lifetime IHT. Am I correct in thinking these were just poorly worded, and were actually referring to gifts into a trust?
This is for personal tax planning, and I will be discussing in more detail with colleagues in due course, but would like to clear a couple of points in my own mind before going any further.
Thank you for your advice in advance.
Replies (9)
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If a parent is gifting rental property to their (adult) child, is it possible for the child to then gift the parent the money due for the CGT liability?
Gift and gift back was the subject of debate in here a few weeks back.
If you instead think of the payment of money as consideration, and the transfer of the property as a sale at undervalue, you'll be on the right road to getting the tax right.
Had a similat style enquiry just this week, but from a different tack.
Son phoned asking about sale at undervalue of parents rental property to him. Over an hour on the phone.
Son really could not take on the issue that there was a gift being made.
And a search box right up top that gives results that help nobody.
Finding the correct search box just for any answers is not intuative
The "gift" back of the CGT liability is likely to be consideration for SDLT, but otherwise don't think you've any problem with your description.
I see it as a PET not a chargeable lifetime transfer, so unaffected by value if exceeding NRB, but IHT is not really my thing. I am assuming there is no reservation of benefit by the parent.
I'm not sure why you saw the need to include the words "for SDLT" in your first sentence, but otherwise don't think you've any problem with it.
IHT wise a PET yes, but net of consideration. It would not be reduced by a mere gift back. So I wasn't being catty with my first sentence. Well, OK, I was, but only to make the point that you'd probably want to establish clearly that the payment was indeed consideration, to make sure you collected the tax upsides, as well as the downs.
Having let the cat out of the bag, though, I have no idea what you mean by your comment about it being unaffected by value.
The law would be a good place to look for the answers.
The quantum of CGT payable is unaffected by who pays the CGT on the gift. HMRC can require the donee to pay if donor does not pay -see TCGA s282.
The quantum of the transfer of value [ a PET in this case apparently] for IHT purposes will be calculated by deducting the CGT if paid by the donee from the value of the property gifted [IHTA sections 164 and 165]