Capital Gains Tax

[mikecork]

In 2005 I purchased an apartment for my daughter, for which I paid cash. The apartment is also in my daughter's name. She only lived in the apartment for a couple of years and then took out a mortgage and is the process of buy this house and currently lives in it. She plans to move back into the apartment for a couple of years and is renting out her house. When she sells the apartment will she be eligible to pay Capital Gains Tax?

[Gizmonster]

I'm fairly sure that if it's your main place of residence, then it's not subject to CGT, but let's wait and see what the experts say ......

[Gizmonster]

Just realised that I mis-read it - I mistakingly thought she took a mortgage out on the flat (to release some equity maybe), so the fact that she owns 2 properties and is going to sell one of them, complicates things and I'd guess that there might be some CGT due ...... like I said - let's see what the experts say :)

[buildersmate]

Cutting to the chase, Gizmonster seems to be saying 'you might have to pay CGT, then again you might not'. Hmmmm.

If your name is not on the Land Registry (LR) title, there is no CGT liability for you. I make that point because you use the word 'also' in the 2nd sentence ('also' to you?)

For your daughter, a CGT liability occurs on (her proportion of) any increase in the value of the property when your daughter sells it from what its value was as at 2005. Any liability only ever occurs when she finally sells it. There are various reliefs that can be applied, and one of them is for the period(s) that she was living in the property. This is called Private Residence Relief. Another rule is that in the final three years of ownership that would otherwise be liable to CGT assessment, any increase in the value of the property is not counted. The 'three year rule of final ownership' is worth understanding because it can be used to one's advantage.

The HMRC rules on this are complicated and she will (eventually) have to use the services of a valuer to assess what the market value of the property would have been in the periods of her total ownership profile where she cannot claim relief - as it is these periods on which CGT is liable. Bearing in mind that property prices have stagnated since 2008 in many parts of the country, she may not have seen much of a gain in her periods of non-residence there.

HMRC produces comprehensive fact sheets about how to work all this out - here.
http://www.hmrc.gov.u...property/calc-cgt.htm

BM