Capital gains related property question

Capital gains related property question

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mikearwas

Original Poster:

1,112 posts

159 months

Tuesday 9th February 2016
quotequote all
Say, for example, two brothers inherited half of a house following the death of their grandfather. Said grandfathers widow (not grandmother) has resided in the house since death of grandfather.

Widows family now wish to sell the property and use the proceeds from their 50% to pay for nursing homes. Their part ownership of this property is the only property in the two brothers names and they have rented accommodation and not lived in said property.

As no other property is owned would said property qualify as two brothers primary residence?

Many thanks

loafer123

15,442 posts

215 months

Tuesday 9th February 2016
quotequote all
Not if they never lived there.


mikearwas

Original Poster:

1,112 posts

159 months

Tuesday 9th February 2016
quotequote all
loafer123 said:
Not if they never lived there.
How long would one have to live there to qualify?

loafer123

15,442 posts

215 months

Tuesday 9th February 2016
quotequote all
mikearwas said:
loafer123 said:
Not if they never lived there.
How long would one have to live there to qualify?
Reading between the lines, my answer to your question is that you would be charged CGT for the period up until you occupy. Occupying does not suddenly get rid of the CGT to date.

HotJambalaya

2,026 posts

180 months

Tuesday 9th February 2016
quotequote all
loafer123 said:
Occupying does not suddenly get rid of the CGT to date.
This.

Supposed they had owned the property for a year, then lived in it for a year then wished to sell, they would be liable for 50% of the CGT due. If they'd lived in it first for a year, then moved out for a year, they would have nothing due, since they would get PPR relief + 18 months free from CGT.

If they wanted to reduce it, they only realistic way would be to offset any home improvements, and even then they're only going to get half of that off set.


deckster

9,630 posts

255 months

Tuesday 9th February 2016
quotequote all
Bear in mind that CGT will only be payable on the uplift in value between when they inherited, and the value at sale. Minus their £11k (each) CGT allowance.

On 25% of a house, I suspect the CGT liability will be pretty small in any case.

uknick

883 posts

184 months

Tuesday 9th February 2016
quotequote all
There is a possibility to avoid the CGT if you can prove to HMRC you never had beneficial ownership of the property.

This will require writing to HMRC asking for dispensation. On the details given here it is not clear whether it would be granted.

But, as said, first look at the possible taxable gain to see whether it's worth the bother of arguing with HMRC

mikearwas

Original Poster:

1,112 posts

159 months

Tuesday 9th February 2016
quotequote all
deckster said:
Bear in mind that CGT will only be payable on the uplift in value between when they inherited, and the value at sale. Minus their £11k (each) CGT allowance.

On 25% of a house, I suspect the CGT liability will be pretty small in any case.
That would be the case if it wasn't a 4 bed in house in a nice area of North London. Current calculated CGT is approaching new M3 money (across our 50% stake) , which hurts.

mikearwas

Original Poster:

1,112 posts

159 months

Tuesday 9th February 2016
quotequote all
uknick said:
There is a possibility to avoid the CGT if you can prove to HMRC you never had beneficial ownership of the property.

This will require writing to HMRC asking for dispensation. On the details given here it is not clear whether it would be granted.

But, as said, first look at the possible taxable gain to see whether it's worth the bother of arguing with HMRC
Thank you very much - that's exactly the kind of thing I was looking for. Can you provide any more details?

uknick

883 posts

184 months

Tuesday 9th February 2016
quotequote all
mikearwas said:
Thank you very much - that's exactly the kind of thing I was looking for. Can you provide any more details?
Nope.

But, if you go to the Money Saving Expert site many posters in the tax section will give you chapter and verse.

bladebloke

365 posts

195 months

Monday 15th February 2016
quotequote all
uknick said:
Nope.

But, if you go to the Money Saving Expert site many posters in the tax section will give you chapter and verse.
I'm a bit late to the party bringing bad news but OP, if you haven't already found out, I wouldn't get your hopes up about this possibility, I'm afraid.

The advice about there being a dispensation if you do not have any beneficial ownership is correct, but here you very clearly do. You own 25% of the property beneficially, and your brother owns another 25%. The question of beneficial ownership isn't related to whether or not you got to live in it or not. The dispensation is designed to excuse people who are on the papers as legal owners but not entitled to proceeds of sale from the tax.

JacquesMesrine

329 posts

134 months

Monday 15th February 2016
quotequote all
mikearwas said:
That would be the case if it wasn't a 4 bed in house in a nice area of North London. Current calculated CGT is approaching new M3 money (across our 50% stake) , which hurts.
As annoying as that is to pay, you're still getting 60% of something compared to 100%!of nothing if it hadn't risen in price.

It's also not something that you've done anything to earn at all, the house itself was a gift too! so sit back and be thankful for a crazy housing market in London.