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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Myself and my brother and sister have jointly inherited my

Resolved Question:

Myself and my brother and sister have jointly inherited my mothers flat which we had to have valued for Inheritance Tax Purposes. If it has increased in value when we sell it we understand that the gain would be subject to capital gains tax.

My sister is resident outside the UK (in the EU) and therefore is not liable to Capital Gains Tax. If we were to get a Deed of Variation to give the property to her and she sold it would she then not have to pay any capital gains tax and would she be liable to any other tax in this case?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

If you executed a deed of variation in favour of your sister so that the property was wholly owned by her, so long as it was sold by 5 April 2015, there would be no UK Capital Gains Tax for her to pay. She may, however, have to pay tax in the country that she is living in.

If your intention is to have your sister then split the disposal proceeds with you and your brother and HMRC find out (I'm not sure how they would but it is possible) they will almost certainly take a dim view, accuse you of aggressive tax avoidance and assess you and your brother to CGT as if the deed of variation never existed.

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

Customer: replied 3 years ago.

If she bought it from us at the probate value would this avoid that problem?


 


Thanks

Expert:  TonyTax replied 3 years ago.
I'm afraid not.

If your sister paid probate value for it she would be treated as having paid the open market value for it as you are connected for tax purposes. Not only that, but the difference between the open market value and the probate value will be treated as a gift by you and your brother to your sister for Inheritance Tax purposes.
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