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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4414
Experience:  FCCA FCMA CGMA ACIS
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I bought my widowed mothers council house at a reduced price

Customer Question

I bought my widowed mothers council house at a reduced price in dec 1988,using her right to buy discount. She had lived there since 1965. She remained living in the house rent free until her death recently aged 94. She had the title deeds in her name,but a trust was drawn up in 2001,to split the proceeds of sale 3 ways upon her death,one third to her,one third to me,and one third to my late husband. Will I have to pay CGT on my now two thirds share when the house is sold,being as she was an elderly dependent relative and had lived there rent free since we purchased the house. We bought the house for two reasons,one being she was terrified the local housing cancel would make her leave the house and put her into a flat. Thankyou. Jean Condon
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello Jean, I'm Keith and happy to help you with your question.

I would approach this from an entirely different angle. As the house was in your mother's name the purchase price you paid was a monetary gift to her. Gifts are outside the scope of UK taxation. When she died you inherited a part share in the house. Inheritances are again outside the scope of UK taxation save that your mother's estate would be subject to Inheritance Tax (IT) if it were over 325K on demise. I suspect that this is unlikely.

You did not obtain possession of the house until her recent death. Everybody knows that houses cannot be immediately marketed and sold which is why some allowance is made for this to occur. The capital gain is the difference between the probate value and your sale value at 2/3. Remember the year of sale does not count and only the gain is taxed. You have an annual exempt allowance of 11.1K to set against any gain for CGT so your exposure to CGT will be minimal and may well be zero.

I do hope I have helped throw some light on your situation.
Customer: replied 3 years ago.

Hello Keith,Thankyou for your reply. As it happens my mothers estate including my share of the property will likely be about £450k.or is my share automatically deducted from her gross estate value? Jean

Expert:  bigduckontax replied 3 years ago.
No, because you did not have a share of her property until she died and your inheritance kicked in. Although her estate exceeds the 325K limit. she may well be entitled to bring forward the balance of her late husband's unused 325K exemption. If he left everything to her than there might be a lot more allowance available to set against her estate.
You may well need trusted, independent, professional advice from a local source on this matter.

I hope I have been able to help Jean with this additional information from both sides.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.
Expert:  bigduckontax replied 3 years ago.
I have made a slight error in my answer to which a colleague has drawn my attention. The Annual Exempt Allowance for 14/15 is only 11K, not 11.1K as I stated in my answer, sorry. 11.1K is the rate for 15/16.