RESSE

iTrader: (1)

Situation:

A friend of mine was gifted her mother's house in 1996, her mother is now in a nursing home (since 18/01/06).

The house (which is not the daughter's principle private residence) is valued at £190,000.

Would there be any capital gains tax liability if the house was sold?

Richard

TopBanana

Yes, of course. Why would she be exempt?

davegtt

Didnt think there was if shes technically owned the house since 1996. 10 years living in it I thought makes it tax excempt?

mightyyid

Given she's been living there for 10+ years, I think this means it's no longer relevant...

RESSE

iTrader: (1)

You cannot get relief (I understand) for any residence acquired after 05/04/1988, BUT

the dependent relative must occupy the dwelling rent free and without any other consideration.

Very confusing.

OllyK

As read it "which is not the daughter's principle private residence" she is NOT living in it and so it's a secondary property and will be subject to taxation.

Tiggs

thats how i read it.....nice bit of planning to remove the house from excempt status during 10 years of massive gains!

Brendan Hughes

I don't get it. The relative must occupy the dwelling. But you won't get capital gains until you sell the dwelling. Are they expecting the relative to continue living in it after it's been sold?

Surely if she's been living in it for 10 years, she's just moved out a week ago and so it's being sold - no problem? They can't expect her to live in it until after it's sold? Isn't it to stop daughter sitting on the empty house for 5 years (or renting it), waiting for the price to go up, then selling it and making a killing?

EDIT - forget it, just read the other stuff. I'll leave this to the experts...

Mungo

Yes, CGT will apply.
Been a while since I did tax exams, but may be able to get reinvestment relief depending on what she spends the proceeds on. Also rollover relief may be available.

TopBanana

The daughter should probably move in to the house for six months to a year (if it doesn't smell too much of wee) before selling

Simon K

I see two things here. Gifted in 96, means that after 7 years, 2003, if her mum died, there would be no inheritenace tax.

Cap. Gains Tax is taken if this house is sold by the daughter. As its not her primary residence, then its up for CGT. This is worked out by how much the house has gained since she recieved it. I think you have an amount it can raise by, then the rest comes under CGT.

SBK

RESSE

iTrader: (1)

SBK - that makes sense.

Thank you.

IHTtapering relief was the reason for the gift in 1996.

Richard

Diablo

Almost - but its the tax on her gain, not the property value gain.

Brendan, CGT is just that - a tax on the capital gain. Until it is sold, there is no gain.

She got it for free (?), therefore her capital gain is the full selling price less any allowances for expenditure she has incurred in keeping it.

Tiggs

"IHTtapering relief was the reason for the gift in 1996."

if it was the only gift in 97 it would have had no tapper relife, only full relife after 7 years.

taper relife has no effect on gifts under the value of the nil band.

RESSE

iTrader: (1)

Tiggs - IHT Nil Rate Band - currently £275,000?

Mungo

Update to my comments re rollover relief and reinvestment relief - these are only available if the house is a business asset. It could only be a business asset if it was rented out as a qualifying furnished holiday letting.
Annual CGT allowance can be used (£8,500 per person for 05-06), and if held in joint names, both allowances can be used. IIRC, last year's allowances (£8,200) can also be brought forward.