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capital gains tax
8 Answers
About 10 years ago my mother legally "gave" her house to me, to avoid inheritance tax. In the meantime the threshold for IH has increased from 300k to 600k (joint). My father died about 25 years ago.
In the recent budget, Capital Gains tax has increased to 18%.
Is it time to reverse the process and "give" the house back to my mother?
Any advise would be appreciated!
In the recent budget, Capital Gains tax has increased to 18%.
Is it time to reverse the process and "give" the house back to my mother?
Any advise would be appreciated!
Answers
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This set alarm bells ringing for me, giving a property, but allowing the donor to stay there, other than at commercial rents could be deemed as not giving it at all. I think the correct term is "gift with reservation", which leaves the property still in the Estate for IHT purposes. I am not sure if under the legislation the 10 year gift period takes it out of that, but if it does for sure CGT will kick in. You state that your father died 25 years ago, what were the terms of his will, if he left one? This is not a question easily answered on a web-site. My best advice would be to spend a few pounds and take Professional advice, as that professional would consider your whole circumstances rather than just the ones surrounding your question here. You may well save a considerable amount of money by spending just a few pounds. Most Solicitors will give you a free 1 hour consultation period, or go to CAB. Plus, who knows what is round the corner!!
Doc seems to have frightened you off.
Its a tax issue, not a legal issue so you really need to find a tax accountant.
If your mother has continued to live in it and you live elsewhere in your own property then it does indeed look like a 'gift with reservations'. Which effectively nulls it from an IHT avoidence point-of-view. However, as you correctly say, unless your father used part of his nil rate band when his estate was wound-up, the rules were changed about 4 years ago such that the unused nil rate band of the first to die is transferrable to the second, on the death of the second partner. This means your mother's estate can have £650k left in the estate before IHT is payable (not £600k as you suggested).
However, whilst your mother may have tried to defeat IHT liability by attempting to transfer the house to you 10 years ago, I am less clear as to whether YOU have now inadvertently incurred a potential liability for CGT on the capital gain in the value of the property between 10 years ago and now. For this, you need tax advice.
Its a tax issue, not a legal issue so you really need to find a tax accountant.
If your mother has continued to live in it and you live elsewhere in your own property then it does indeed look like a 'gift with reservations'. Which effectively nulls it from an IHT avoidence point-of-view. However, as you correctly say, unless your father used part of his nil rate band when his estate was wound-up, the rules were changed about 4 years ago such that the unused nil rate band of the first to die is transferrable to the second, on the death of the second partner. This means your mother's estate can have £650k left in the estate before IHT is payable (not £600k as you suggested).
However, whilst your mother may have tried to defeat IHT liability by attempting to transfer the house to you 10 years ago, I am less clear as to whether YOU have now inadvertently incurred a potential liability for CGT on the capital gain in the value of the property between 10 years ago and now. For this, you need tax advice.
Buildersmate,
I stick by my recommendation that peejayare should take professional advice. There are many questions here, and only someone with the whole picture, including knowledge of all the sums of money involved, and at each stage would be able to give appropriate guidance. Was the property gifted by the use of a trust, did a solicitor draft the deed of transfer, or was itt done by other means? In my experience there will never be a one solution fits all for these sorts of questions. Whilst it may be possible for us to give some indications of problems, which I think we may have done, at the end of the day, only professional advice will steer peejayare to the most tax efficient solution. My own solicitor used tax specialists within his own practise to organise my estate to be tax beneficial to my heirs.
I stick by my recommendation that peejayare should take professional advice. There are many questions here, and only someone with the whole picture, including knowledge of all the sums of money involved, and at each stage would be able to give appropriate guidance. Was the property gifted by the use of a trust, did a solicitor draft the deed of transfer, or was itt done by other means? In my experience there will never be a one solution fits all for these sorts of questions. Whilst it may be possible for us to give some indications of problems, which I think we may have done, at the end of the day, only professional advice will steer peejayare to the most tax efficient solution. My own solicitor used tax specialists within his own practise to organise my estate to be tax beneficial to my heirs.
No problems.
I don't think I was asking you to change your advice, and actually we have both come to the same conclusion.
However it is all too easy for answers in these technical sections to just pass the problem along without any attempt to offer guidance. Thus too many questions in 'Law' suggest 'go to CAB' or 'see a solicitor', ones in 'Business & Finance' conclude with 'go and see an accountant'. Whatever next? People will be recommending 'go talk to a builder' in the DIY section.
I don't think I was asking you to change your advice, and actually we have both come to the same conclusion.
However it is all too easy for answers in these technical sections to just pass the problem along without any attempt to offer guidance. Thus too many questions in 'Law' suggest 'go to CAB' or 'see a solicitor', ones in 'Business & Finance' conclude with 'go and see an accountant'. Whatever next? People will be recommending 'go talk to a builder' in the DIY section.
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