Capital Gains Tax query

[anotherbigspender]

I inherited a 50% share of a property 10 years ago. The property is now going to be sold but I do not intend to benefit from the proceeds, in that the funds would be gifted immediately on receipt. I am aware that I would be liable for CGT on the 10 capital growth in value of my 50% share of property over the period I owned it,

If I do not want to have the CGT liability since I do not stand to benefit from the proceeds, presumably am I able to transfer ownership of my 50% share prior to the sale to those who are intended to benefit from the proceeds of the sale?

What is the CGT position in this scenario?

Thanks

[Dixy]

Who are you gifting to

[anotherbigspender]

Adult family

[Mr Pointy]

Stamp Duty might come into play.

[anotherbigspender]

Mr Pointy said:

Stamp Duty might come into play.

So it’s either SDLT on the gifted share pre-sale or CGT on the sale proceeds and then gift them?

[springfan62]

anotherbigspender said:

I inherited a 50% share of a property 10 years ago. The property is now going to be sold but I do not intend to benefit from the proceeds, in that the funds would be gifted immediately on receipt. I am aware that I would be liable for CGT on the 10 capital growth in value of my 50% share of property over the period I owned it,

If I do not want to have the CGT liability since I do not stand to benefit from the proceeds, presumably am I able to transfer ownership of my 50% share prior to the sale to those who are intended to benefit from the proceeds of the sale?

What is the CGT position in this scenario?

Thanks

The same, your gift is valued at market value and cgt payable on that.

[Mr Pointy]

anotherbigspender said:

Mr Pointy said:

Stamp Duty might come into play.

So it’s either SDLT on the gifted share pre-sale or CGT on the sale proceeds and then gift them?

No, you might get hit with both in the first scenario.

[springfan62]

I don't think SDLT is payable on a gifted property.

[Mr Pointy]

springfan62 said:

I don't think SDLT is payable on a gifted property.

It looks like you are correct as long as there is no mortgage on the property.

[Eric Mc]

You won't escape CGT by gifting.

[anotherbigspender]

Eric Mc said:

You won't escape CGT by gifting.

Personally? I accept CGT will be due at some point in the process but if I am not personally benefitting from the capital gain then I’d rather the liability is borne by those that do.

[Panamax]

anotherbigspender said:

if I am not personally benefitting from the capital gain then I’d rather the liability is borne by those that do.

It's the same thing either way. If you sell/dispose/gift the property then CGT becomes payable within 60 days.

Fairly obviously, the "gift" you make will be the net value of the property after CGT has been calculated/deducted and whether or not that CGT has yet been paid.

[Eric Mc]

anotherbigspender said:

Eric Mc said:

You won't escape CGT by gifting.

Personally? I accept CGT will be due at some point in the process but if I am not personally benefitting from the capital gain then I’d rather the liability is borne by those that do.

I think the only way to escape the CGT is to have your name taken off the list of beneficiaries and let the other beneficiaries have your share of the sale proceeds

For you to be able to "gift" your share to somebody who isn't already a beneficiary mentioned on the will, you will have needed to take possession of your share of the proceeds of the property sale in the first place. That will trigger a personal CGT liability for you.

You can only give away (gift) something that is yours to give.

[anotherbigspender]

Eric Mc said:

I think the only way to escape the CGT is to have your name taken off the list of beneficiaries and let the other beneficiaries have your share of the sale proceeds

For you to be able to "gift" your share to somebody who isn't already a beneficiary mentioned on the will, you will have needed to take possession of your share of the proceeds of the property sale in the first place. That will trigger a personal CGT liability for you.

You can only give away (gift) something that is yours to give.

But it is mine to give in that my name is on the Title as owning 50%.

This isn’t a scenario where assets are being distributed following a death. I inherited my share, yes, but that was 10 years ago.

[Eric Mc]

anotherbigspender said:

But it is mine to give in that my name is on the Title as owning 50%.

This isn’t a scenario where assets are being distributed following a death. I inherited my share, yes, but that was 10 years ago.

Well, it's your's then and no matter how you get rid of it, it looks like there will be some sort of "gain" calculated on the disposal on which you will be subject to CGT.

And don't forget about the "60 day rule".

[AdamV12V]

You are confusing the two transactions, the sale of the property and the gifting of funds (or an asset). They are distinct transactions in the eyes of the taxman, even if done back to back with little pause between.

The "will" comments are also a little misleading above. If you inherrited the property 10years ago then it will already be in your name. The will is done and dusted and the asset is now formally 50% yours.

You have two choices:

• 1 - You can sell the property, pay CGT on 50% of the gain from the value declared in probate at the inheritance to sale (less costs and annual CGT allowance), then gift what is left to the person. As long as you live for 7yrs no further taxation. If you die within 7yrs then some IHT may be due on the gift of the proceeds depending on the value of your estate. SDLT does not apply at all here.
• 2 - You can gift your 50% of the property to the person, then they sell it. SDLT only comes into it if there is a mortgage, then the value of the transaction for SDLT calculation is 50% of the mortgage balance regardless of the remaining capital being gifted. They pay CGT on the increase in value from the gift to sale price. Clearly this route would generate more CGT but it is squarely on the recipient of the gift.

And either way, if its a second property then yes, 60days from sale completion date to file AND pay the CGT due for whichever party it falls upon.

[Alex Z]

anotherbigspender said:

Eric Mc said:

You won't escape CGT by gifting.

Personally? I accept CGT will be due at some point in the process but if I am not personally benefitting from the capital gain then I’d rather the liability is borne by those that do.

I suspect the only way to do that is for the person you gift it to, to reimburse you for any CGT. That’s a deal I’d quite happily take if anyone wants to give me a house.
Have you calculated how much is due give ten years of allowances?

[AdamV12V]

Alex Z said:

I suspect the only way to do that is for the person you gift it to, to reimburse you for any CGT. That’s a deal I’d quite happily take if anyone wants to give me a house.
Have you calculated how much is due give ten years of allowances?

I've just posted the two main options above...

You don't get to roll over and keep 10years of allowances either.... Only the allowance in the year of sale, which is £6000 now until 6th April, then it drops to £3000.

[anotherbigspender]

AdamV12V said:

You are confusing the two transactions, the sale of the property and the gifting of funds (or an asset). They are distinct transactions in the eyes of the taxman, even if done back to back with little pause between.

The "will" comments are also a little misleading above. If you inherrited the property 10years ago then it will already be in your name. The will is done and dusted and the asset is now formally 50% yours.

You have two choices:

• 1 - You can sell the property, pay CGT on 50% of the gain from the value declared in probate at the inheritance to sale (less costs and annual CGT allowance), then gift what is left to the person. As long as you live for 7yrs no further taxation. If you die within 7yrs then some IHT may be due on the gift of the proceeds depending on the value of your estate. SDLT does not apply at all here.
• 2 - You can gift your 50% of the property to the person, then they sell it. SDLT only comes into it if there is a mortgage, then the value of the transaction for SDLT calculation is 50% of the mortgage balance regardless of the remaining capital being gifted. They pay CGT on the increase in value from the gift to sale price. Clearly this route would generate more CGT but it is squarely on the recipient of the gift.

And either way, if its a second property then yes, 60days from sale completion date to file AND pay the CGT due for whichever party it falls upon.

Thanks for the comprehensive response. In your scenario 2 if the gift of the share took place reasonably close to the sale occurring, say < 6 months between the two events, what would be my personal CGT liability and then the beneficiaries liability? There is no mortgage so SDLT shouldn’t be a factor.

[uknick]

AdamV12V said:

You are confusing the two transactions, the sale of the property and the gifting of funds (or an asset). They are distinct transactions in the eyes of the taxman, even if done back to back with little pause between.

The "will" comments are also a little misleading above. If you inherrited the property 10years ago then it will already be in your name. The will is done and dusted and the asset is now formally 50% yours.

You have two choices:

• 1 - You can sell the property, pay CGT on 50% of the gain from the value declared in probate at the inheritance to sale (less costs and annual CGT allowance), then gift what is left to the person. As long as you live for 7yrs no further taxation. If you die within 7yrs then some IHT may be due on the gift of the proceeds depending on the value of your estate. SDLT does not apply at all here.
• 2 - You can gift your 50% of the property to the person, then they sell it. SDLT only comes into it if there is a mortgage, then the value of the transaction for SDLT calculation is 50% of the mortgage balance regardless of the remaining capital being gifted. They pay CGT on the increase in value from the gift to sale price. Clearly this route would generate more CGT but it is squarely on the recipient of the gift.

And either way, if its a second property then yes, 60days from sale completion date to file AND pay the CGT due for whichever party it falls upon.

I may have misread point 2, but how does the OP avoid CGT if they gift it to a family member or other connected party? As it's not an arms length deal the gift will be deemed to be at market value for tax purposes.