How does CGT/IHT work in complex scenarios?
Discussion
My FIL purchased a gargantuan, ramshackle old house thirty-odd years ago that had a number of outhouses on top of the 20+ rooms in the main house. This was all purchased as a single job lot. Since then, he has poured a lot of cash into it, along with a lot of his own time to renovate it, has rented out rooms to lodgers - although it has also always been the main family residence - converted an old barn into accommodation and sold it off and also converted a couple of other outbuildings into lettable properties. He has some of the receipts for some of the expenditure, but there's also a huge amount he hasn't have kept, mainly as it has always been the family home, and how many of us actually bother to keep every receipt for work we do on our own homes?
Everything is rosy at the moment, as he's funding a very comfortable retirement off the property, is more than able to keep on top of the running of it, and hopefully that will remain the case for years to come! At some point, though, he's either going to want to sell up and move into something more manageable, or it's going to be left as an inheritance to be sorted out.
Presumably at that point - assuming he sells - HMRC are going to consider some of the property as his main residence, but some of it will presumably be considered as second homes or something similar? If it's all sold as a single lot though, how do they decide how much of it lands in each bucket? In similar vein, if he sells off part of it as a standalone property, how do they decide what that has appreciated by for CGT, given that it doesn't have a separate purchase price on which to calculate the gains?
Having seen how much more of my grandfather's (far less complicated) estate HMRC got their grubby little paws on than would have been the case had he engaged in even a modicum of financial planning, we figured it was sensible to look in to it and figure out whether there are any actions that could be taken now to minimise any future downsides! That will no doubt involve paying for the services of a solicitor and/or accountant, but at the moment I'm just trying to get my head round the basics of how a scenario like this would even be assessed?!?
Any pointers gratefully received, as I like to think of myself as a reasonably competent person when it comes to understanding processes and procedures but this one is just making my head explode!
Everything is rosy at the moment, as he's funding a very comfortable retirement off the property, is more than able to keep on top of the running of it, and hopefully that will remain the case for years to come! At some point, though, he's either going to want to sell up and move into something more manageable, or it's going to be left as an inheritance to be sorted out.
Presumably at that point - assuming he sells - HMRC are going to consider some of the property as his main residence, but some of it will presumably be considered as second homes or something similar? If it's all sold as a single lot though, how do they decide how much of it lands in each bucket? In similar vein, if he sells off part of it as a standalone property, how do they decide what that has appreciated by for CGT, given that it doesn't have a separate purchase price on which to calculate the gains?
Having seen how much more of my grandfather's (far less complicated) estate HMRC got their grubby little paws on than would have been the case had he engaged in even a modicum of financial planning, we figured it was sensible to look in to it and figure out whether there are any actions that could be taken now to minimise any future downsides! That will no doubt involve paying for the services of a solicitor and/or accountant, but at the moment I'm just trying to get my head round the basics of how a scenario like this would even be assessed?!?
Any pointers gratefully received, as I like to think of myself as a reasonably competent person when it comes to understanding processes and procedures but this one is just making my head explode!
I cannot answer your questions, well above my pay grade, but perhaps cut and paste here as well....
https://forum.qandamoney.co.uk/categories
https://forum.qandamoney.co.uk/categories
There are recognised techniques used for calculating how much of a property is allocated to Main Residence and how much is not. It is not that unusual a situation - for example people who have run a guest house will encounter such a scenario.
The basic way of doing this is by utilising floor area - although there will be some adjustments for other aspects of the property. (surrounding land, shared facilities etc) HMRC is flexible up to a point.
However, if and when the time comes for the property to be sold, professional advice would be highly advised.
The basic way of doing this is by utilising floor area - although there will be some adjustments for other aspects of the property. (surrounding land, shared facilities etc) HMRC is flexible up to a point.
However, if and when the time comes for the property to be sold, professional advice would be highly advised.
Eric Mc said:
There are recognised techniques used for calculating how much of a property is allocated to Main Residence and how much is not. It is not that unusual a situation - for example people who have run a guest house will encounter such a scenario.
The basic way of doing this is by utilising floor area - although there will be some adjustments for other aspects of the property. (surrounding land, shared facilities etc) HMRC is flexible up to a point.
However, if and when the time comes for the property to be sold, professional advice would be highly advised.
Thanks Eric! When the time comes we'll definitely get professional advice, I'm just curious as to how it all works. The basic way of doing this is by utilising floor area - although there will be some adjustments for other aspects of the property. (surrounding land, shared facilities etc) HMRC is flexible up to a point.
However, if and when the time comes for the property to be sold, professional advice would be highly advised.
Gassing Station | Finance | Top of Page | What's New | My Stuff