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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15942
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My father transferred a plot of land (and dwelling house and

Resolved Question:

My father transferred a plot of land (and dwelling house and anything else thereon) into my name 20 years ago. Both my parents have dementia and reside in nursing homes. I am in the process of selling the property (mainly to so I can buy my husband out of our home as part of a divorce settlement) Can you tell me please if I'm liable to pay tax on the sale of the house transferred to me by my father, if so how is this calculated?
Many thanks
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you tell me if your have ever lived in the house during your ownership of it. To what use has the house and plot been to in the last 20 years? What is the size of the total plot, house and land? What was it worth when it was gifted to you? Are the plot of land and the land the house stands on directly connected? How much is the house and plot of land worth now? Are you planning to sell just the house or the whole package? If you are just planning to sell the house, please let me know what the house was worth 20 years ago and what it is worth now?
Customer: replied 3 years ago.

The house has been lived in by my parents during the last 19 years until the moved into permanent care. I have never lived in the house. The house is a three bedroomed bungalow with a reasonable sized smallish garden front and back. I have little idea what it would have been worth 20 year ago- the plot and house were build 25 years ago for around £43000 the house and plot are being sold for £191000

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer. There are a number of issues that need addressing so please bear with me.
Customer: replied 3 years ago.

ok thanks


 

Expert:  TonyTax replied 3 years ago.

Hi again.

CAPITAL GAINS TAX

Let's say that the property was worth £50,000 when it was gifted to you 20 years ago. That would mean if you sold it for £191,000 you would make a gain of £141,000. The first £10,900 of the gain will be exempt assuming you have made no other gains in the current tax year, leaving you with a net taxable gain of £130,100.

There are two rates of CGT, 18% and 28%. The rate or combination of rates you will pay will be dependent on the level of your income in the tax year of disposal of the property. Assuming you sell the property in the 2013/14 tax year, one of the following will apply:

1 If your income in 2013/14 including the taxable gain is £41,450 or less, then all the taxable gain will be taxed at 18%.

2 If your income in 2013/14 excluding the taxable gain is more than £41,450, then all the taxable gain will be taxed at 28%.

3 If your income in 2013/14 excluding the taxable gain is less than £41,450 but more than £41,450 when you include the taxable gain, then part of it will be taxed at 18% and part at 28%.

GIFT OF THE HOUSE TO YOU

As your father continued to live in the house after it was gifted to you, he is caught by the gift with reservation of benefit rules which you can read about here. As he now lives in a nursing home, the reservation of benefit has ceased and your father will be treated as having made a potentially exempt transfer of the property to you at the time he moved away from the property. There is more information on gifts with reservation of benefit and potentially exempt transfers here and here. Unless he lives for seven years after the date he moved into the nursing home, the value of the property at the time he moved out will be included in his estate for Inheritance Tax purposes even though he no longer owns it. You can read about Inheritance Tax here.

NURSING HOME FEES


I'm not an expert on how local authorities work insofar as care home fees are concerned but you might be interested in reading the article from 2013 here.

I hope this helps but let me know if you have any further questions.

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