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Sam
Sam, Accountant
Category: UK Tax
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I am looking to acquire a property from my father in the UK. I

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I am looking to acquire a property from my father in the UK.

I live overseas. At the moment, it is a second property for him, although my grandfather lives in it. It is not accumulating any rental income but has risen in value.

If he gifts this property to me as it is, with my grandfather still living in it, is it liable for capital gains tax?

If it is, then is there any way around this?

Hi

 

Thanks for your question

 

I assume your father lives in the UK? If so, then you are correct in thinking that capital gains will arise on your father when he gifts this property to you.

 

Can you advise the year that this property was purchased by your father, and how long your grandfather has lived in this property, and whether he has always lived alone in this property, as there may be some consideration for that factor.

 

Thanks


Sam

 

 

Customer: replied 3 years ago.


Hi Sam.


 


Yes - he lives in the UK.


 


Purchase date? I will have to check. But 15 years ago or more.


 


For a long time the house has had my grandfather in it.


 


Not sure how long he's been in it though. Will need to check.


 

Hi

 

Thanks for your response

 

If the property was acquired after 05/04/1988 - then there is not any scope to consider dependents relief and the capital gain will be the value at the time the gift is transferred to you, less the price your father acquired it at.

Then from this figure, just the first £10,600 will be exempt. The remainder liable to capital gains tax.

 

I am afraid there is no way of avoiding capital gains, at this late stage, and your father would have been best seeking advise at the time he acquired the property, but any action at this stage will still lead to a capital gain consideration.

 

Let me know if the property was acquired before 05/04/1988 and details of your grandfathers moving in date.

 

If, in the meantime you could rate the level of service provided, it would be appreciated, as this ensures I am paid.

 

Thanks

 

Sam

 

Thanks

 

Sam

Customer: replied 3 years ago.


Much as I thought. The only other way I thought of doing it was a 25% stake over the next 4 years.


 


Then he could eat his allowance each year. The property is worth about 90,000 and had a gain of about 50,000, purchased for 40,000.


 


Not sure how this would be viewed though.

Hi

 

This would be acceptable, as he could just gift you 25% each tax year for the next 4 years or better still 20% over the next 5 years (so he is below the capital allowance threshold of £10,600 a year)

 

However I will advise that you should also get your father to consider the Inheritance tax position, that if he should not survive more than 7 years from the date of the gift (which in essence means between 7 and 12 years,depending over what period of time this is gifted) then if his estate is worth more than £325,000 (including this property value of £90,000) then he may have Inheritance tax to consider , so make sure he alerts his solicitor (or keep papers with his will) of these transactions and dates, and what % share has been gifted, and the value of the property at market value, at each stage of any transfer.

 

Thanks

 

Sam

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