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TonyTax
TonyTax, Tax Consultant
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Our son in law was given by his widowed mother by deed of gift,

Customer Question

Our son in law was given by his widowed mother by deed of gift, a holiday home in Scotland last year. The marriage is now breaking up. It is intended that our daughter will receive the proceeds of sale of the Scottish property in exchange for giving up her half share of the family home ( Value £300,000 +) The SCottish property is on the market at £250,000.
What is the Capital Gains tax position?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Is the Scottish property owned solely by your son in law? How much was it worth when it was gifted to him? Are the couple living apart? If so, which of them is living in the family home and how long ago did the other one move out?
Customer: replied 2 years ago.

Property only owned by son-in law. Value as now £250,000.


Still both living in family home until she can purchase property, hopefully from proceeds of Scottish property.


 


There are two children, boys age 11 & 13.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.
Hi again.

If the Scottish property is sold for the same as what it was worth when your son in law was gifted it, then there will be no CGT to pay. The value at the time of the gift is his "cost" for CGT purposes. The first £11,000 of gains made by an individual in the 2014/15 tax year will be exempt from CGT and the costs of selling the property (legal fees, selling agent fees etc) will also be deductible from any gain so he has some leeway. The tax office could challenge the gift date value so you need to be sure of your ground and it might be a good idea to ask the selling agent and possibly one other for their view as to its value when it was gifted and to put that in writing.

There should be no CGT for your daughter as a result of her selling her half share of the family home to her husband. Firstly, the disposal of one's main residence is exempt from CGT in any event provided it has always been their main home during their ownership of it. Secondly, where one party to a divorce is selling their share of the family home to the other party who intends to say there, relief from CGT can be claimed for that if necessary, ie where the selling party moved out more than three years ago (18 months ago from 6 April 2014) and they haven't elected for another property to be treated as their main home.

The cash payment to your daughter will not be taxable in her hands. There may be Inheritance Tax implications if the cash is not gifted before the Decree Absolute or Decree of Divorce in Scotland and I understand that all financial arrangments have to be in place before that is granted. Payments made under a court order are normally exempt from IHT. IHT would not be an issue so long as your son lives for at least seven years after the cash payment is made.

Take a look here for information on divorce and tax.

I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15840
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Expert:  TonyTax replied 2 years ago.
Thanks for accepting my answer.

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