Housed gifted over 25 yrs ago- Capital Gains Tax question

[spirituscorpus]

Mum gifted me her house in 1997. Both myself and her continued to live in the same house until 2008 at which point I moved out.

She had lived in the same house since about 1961 so if the gain in valuation is used as a base then the CGT tax could be significant.

I am completely flummoxed by trying to figure out any potentgial liabilities as many websites just use the same copy and paste content which doesn't really answer my question.

Can anyone please shed some light as to how best to calculate liabilities if the property was sold?

 

[Neveradullday!]

I may be wrong, but if a house is someone's main residence, there's no CGT to pay.

 

[spirituscorpus]

I may be wrong, but if a house is someone's main residence, there's no CGT to pay.

Thank you and I have seen that also but whose main residence? My mother's or myself? Does that exemption apply to the donor or the recipient?

If myself then what happened when I moved out?

 

[nitram]

Was the CGT calculation done at the time of transfer which would have been regarded as a sale at market value?

Principal Private Residence relief (PPR) may exempt some or all of the gains from CGT.

At transfer it applied to mother.
On sale it will apply to you.

 

[spirituscorpus]

Was the CGT calculation done at the time of transfer which would have been regarded as a sale at market value?

Principal Private Residence relief (PPR) may exempt some or all of the gains from CGT.

At transfer it applied to mother.
On sale it will apply to you.

Thanks. No CGT calculation was done at the time of transfer. I don't recall it even being mentioned by the solicitor although I accept the responsibility was on us to be informed.

So could PPR apply to either the donor or the recipient if both lived in the house as a main residence for a period of time?

 

[jugglingmum]

There are some massive BUTs at the end so please read to the end.

If your mum gifted her house to you in 1997 and it was her principle private residence (PPR) up to that point, then there was no cgt at that point.

As it was your mum's PPR no cgt calculation was needed.

Your base cost should be the value of the house in 1997, and for cgt purposes it was your PPR until 2008 so that period of ownership is exempt. This is normally calculated on a linear basis, so if sold, value sold at less value in 1997 pro rated based on no of months ownership.

So from 2008 to current day any gain accruing is subject to cgt.

You do have an annual exemption which you can use against this.

Now for the BUTS

There are some complex tax rules around gifting PPR and if your mum hasn't paid you rent since you moved out, the transfer might not be a valid one for tax purposes (both cgt and iht). Anti avoidance legislation was brought in retrospectively at some stage (not sure when but it does apply to any transfers made where the transferor continued to reside in the house).

I'm not sure what the situation would be whilst you and your mum were both living in the house.

If your mum hasn't paid you full market rent than you need professional advice from an accountant (not a solicitor) with appropriate tax knowledge.

It doesn't mean there will be tax to pay, but that you need to confirm the situation, in particular has a valid transfer for tax purposes happened. HMRC may deem that your mum is still the owner.

It is very complicated legislation which I am aware of but don't fully know the ins and outs.

 

[Veritas]

Mum gifted me her house in 1997. Both myself and her continued to live in the same house until 2008 at which point I moved out.

She had lived in the same house since about 1961 so if the gain in valuation is used as a base then the CGT tax could be significant.

I am completely flummoxed by trying to figure out any potentgial liabilities as many websites just use the same copy and paste content which doesn't really answer my question.

Can anyone please shed some light as to how best to calculate liabilities if the property was sold?

From an IHT point of view, if your mother has not paid you a market rent since she made the gift, this is a gift with reservation of benefit. This means that IHT is still payable on the gift, at her death. You need specialist advice in this situation, and I would urge you to take this sooner rather than later. It would be a false economy not to.

 

[spirituscorpus]

From an IHT point of view, if your mother has not paid you a market rent since she made the gift, this is a gift with reservation of benefit. This means that IHT is still payable on the gift, at her death. You need specialist advice in this situation, and I would urge you to take this sooner rather than later. It would be a false economy not to.

Thank you.

I presume the IHT threshold would still be valid though?

 

[Veritas]

Thank you.

I presume the IHT threshold would still be valid though?

Yes, but which threshold is the question. That’s another reason why you need specialist advice.

 

[spirituscorpus]

Yes, but which threshold is the question. That’s another reason why you need specialist advice.

Inheritance tax threshold which I believe is £ 325,000 for the estate. My mother's house is worth £ 170,000 tops with no significant savings as they have been exhausted over the last 3 months paying for live in carers

 

[Veritas]

Inheritance tax threshold which I believe is £ 325,000 for the estate. My mother's house is worth £ 170,000 tops with no significant savings as they have been exhausted over the last 3 months paying for live in carers

Then you are probably OK from an IHT point of view, but it will be expected that the house is sold to free up the funds for care home placement, in the event that it is deemed to be still hers in spite of the gift. It may be that the gift has been “successful” in the sense that you own the house (what’s on record at the Land Registry?) but the gift is not IHT exempt. You urgently need to clarify your own position, so specialist advice remains important.