CGT on uk property??

[lilkaz]

Hello,

I am selling a property in the UK, which was given to me by my dad 3 and a half years ago. I have never rented it - my dad lives there rent free, and I own it outright. I don't own any other property - I rent the apartment I live in in France.

I am selling as my dad has now decided to come and live in France - I have lived here for almost 6 years and am in the French tax system.

I want to buy 2 small apartments - one for my dad and one for myself, but am worried I might have to pay capital gains on the sale of the house as I don't live in it.

Any advice would be much appreciated.

Thanks!

[nectarine]

I'm no tax expert but there's two things that strike me:

First of all, your dad gave it to you as a gift. Technically he should receive no benefit from that gift so for him to live there and enjoy the property, rent-free, might be a no-no. There's a limit to the amount of gift that you can give each year without incurring tax on the value of it ...

Secondly, you'd only pay CGT on the profit that you have made. If the value of the house, from the date your father passed it to you and now, has increased then I'm impressed as property has generally fallen. Did you get some kind of valuation at the date of transfer and, if not, might an estate agent be able to advise you. Preferably you would want to show no profit, particularly as house prices have fallen.

Did the transfer take place with any kind of legal document about this gift?

I think this is very complicated and you'd do well to pay for some proper legal advice that might save you a small fortune in the long run. Good luck.

[lilkaz]

Thanks for your reply.

My dad gave me the house because he thought I would be able to use it to raise capital to buy a place in France, which unfortunately turned out not to be the case as I didn't have any income in the UK, and also because my sister ended up with my grandparents house.

I have a "deed of gift" for the property and I'm sure my dad had the property valued not long before he gave it to me, but I never paid him any money for it, so am not sure if I might be liable to pay tax on the whole sale price of the property.

[Judie]

Here's the HMRC website link

http://www.hmrc.gov.uk/cgt/property/basics.htm#6

Looks like you may be liable but do take proper advice.

Sorry the link may need to be cut and pasted.
.

[Alan Zoff]

Nectarine may be confusing CGT with IHT.

For IHT, a gift remains in the donor's estate if he continues to take any benefit from it (e.g. occupy without paying a fully commercial rent). The gift for IHT becomes effective - and the 7 year clock begins running (see below) - only when the donor ceases to draw that benefit.

Unlike CGT on any gain in excess of allowances, there is however no immediate IHT to pay on the gift, regardless of value, if it is an outright gift (i.e. not into a trust). It's referred to as a "potentially exempt transfer". If the donor fails to survive the gift by 7 years, it is treated as using up the first part of his £325,000 nil rate band. Still no IHT on it when he dies if the gift is worth less than £325,000, but the rest of the donor's estate has a reduced nil rate band so the beneficiaries of the estate might have to pay more IHT than expected (of most concern if the donee of the gift is not the same as the beneficiaries of the estate). If the gift was worth more than £325,000, IHT will be payable on the excess value if the donor dies within 7 years but taper relief might apply to reduce the tax. (The nil rate band might be more than £325,000 if the donor inherited unused nil rate band from a deceased spouse or civil partner.)

As has been said, your base cost for the gift for CGT was its value when your father gave it to you. If it was always his main private residence, he whould have had no CGT to pay on the gift. And if the gain since is covered by your annual CGT allowance (or if you are non-resident for UK tax), you won't have CGT to pay either. (But someone else perhaps can advise on French tax consequences.)

[Kitty]

I read somewhere that the property value then and the value now has to be converted from pounds sterling into euros at the approved rate of exchange of the time.  Hopefully, someone on the Forum will be able to confirm this (or otherwise).

Therefore, any gain may have been diminished (or enhanced) by the fall (or rise) in the exchange rate - possibly...

[parsnips]

[quote user="Kitty"]I read somewhere that the property value then and the value now has to be converted from pounds sterling into euros at the approved rate of exchange of the time.  Hopefully, someone on the Forum will be able to confirm this (or otherwise).

Therefore, any gain may have been diminished (or enhanced) by the fall (or rise) in the exchange rate - possibly...

[/quote]

Hi,

 That is  correct. Find past exchange rates here---http://www.ecb.int/stats/exchange/eurofxref/html/index.en.html---or---

http://www.xe.com/

If the dates are in your favour all your gain could be eliminated for french CGT.