Discussion
Hi All,
I am already a member here but have logged in under a different username to remain anonymous.
I have a question regarding the property my girlfriend lives in.
It is owned by her mother and uncle who inherited it when her gran died some 10 years ago, my girlfriend has lived in it since then. If my girlfriend moves out and her mum/uncle sell it, will they have to pay CGT on the property? (there is no mortgage)
If so, if they were to gift the property to my girlfriend now, she lives in it for 12months or whatever the minimum is and then sells the property would she have to pay CGT? She could then gift some money to her mum and uncle at a later date.
Is this possible or legal?
Thanks.
I am already a member here but have logged in under a different username to remain anonymous.
I have a question regarding the property my girlfriend lives in.
It is owned by her mother and uncle who inherited it when her gran died some 10 years ago, my girlfriend has lived in it since then. If my girlfriend moves out and her mum/uncle sell it, will they have to pay CGT on the property? (there is no mortgage)
If so, if they were to gift the property to my girlfriend now, she lives in it for 12months or whatever the minimum is and then sells the property would she have to pay CGT? She could then gift some money to her mum and uncle at a later date.
Is this possible or legal?
Thanks.
Probably better in the business forum I suspect, but my understanding is that yes there will be a capital gain tax due against the increase over the last 10 years as it was not her mother or uncles main residence - CGT is worked out on the market value and NOT what they sell it for, so even if they sold it for the value it was 10 years ago (to her for instance as an attempt at a dodge) there would still be a potential CGT liability if the revenue investigated. Gifting it at this stage does not negate the CGT and gifting it and gifting money back later will do nothing to help, that's just repaying a a loan and is perfectly ok without masking it as a gift - there is a 7 year rule on gifts being potentially tax exempt, but this is used to get around Inheritance tax, nothing to do with CGT.
CGT starts at 40% but there is taper relief available to bring this down and which maxes out at 10 years but (at the last count) this is disappearing in April to be replaced by by a flat rate 18% liability from day 1.
CGT starts at 40% but there is taper relief available to bring this down and which maxes out at 10 years but (at the last count) this is disappearing in April to be replaced by by a flat rate 18% liability from day 1.
Edited by touching cloth on Monday 25th February 09:03
touching cloth said:
Probably better in the business forum I suspect, but my understanding is that yes there will be a capital gain tax due against the increase over the last 10 years as it was not her mother or uncles main residence - CGT is worked out on the market value and NOT what they sell it for, so even if they sold it for the value it was 10 years ago (to her for instance as an attempt at a dodge) there would still be a potential CGT liability if the revenue investigated. Gifting it at this stage does not negate the CGT and gifting it and gifting money back later will do nothing to help, that's just repaying a a loan and is perfectly ok without masking it as a gift - there is a 7 year rule on gifts being potentially tax exempt, but this is used to get around Inheritance tax, nothing to do with CGT.
CGT starts at 40% but there is taper relief available to bring this down and which maxes out at 10 years but (at the last count) this is disappearing in April to be replaced by by a flat rate 18% liability from day 1.
TAlk to an accountant/tax lawyer. THere is/was a three year 'deemed residence' for second properties being sold, so you could ignore the CGT on the price rises since Feb 2005. But it all might've changed since I sold my flat.CGT starts at 40% but there is taper relief available to bring this down and which maxes out at 10 years but (at the last count) this is disappearing in April to be replaced by by a flat rate 18% liability from day 1.
Edited by touching cloth on Monday 25th February 09:03
And taper relief only takes it down to 10%, I believe?
Don't think the 3 year rule comes into play here as was not their main residence at any point from the sounds of things. Also yes maybe my wording was misleading re the taper relief, I didn't mean "maxing out" meaning it reduced the liability to zero, just that you didn't get any benefit to holding longer than 10years. The taper relief reduction to 10% is only for business assets, in this case the property will be a non business asset and as such at full taper relief, the liability will reduce from 40% to 24% for high rate taxpayers or down to 12% for low rate - as I say, after April this will become a standardised 18% regardless of the length held or tax rate.
Only other thing to mention is that, as it is owned jointly, they will be able to pool their CGT allowances in the year of sale meaning they can knock about £18k off the growth also.
Only other thing to mention is that, as it is owned jointly, they will be able to pool their CGT allowances in the year of sale meaning they can knock about £18k off the growth also.
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