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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Can the ownership of a house be split into several parts, for

Customer Question

Can the ownership of a house be split into several parts, for instance 10, and a single part given away. Would this trigger a capital tax liability on the part or the whole?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you give me a little more detail as to what you are trying to achieve please. What is your relationship to the potential recipient of a 10% sahre in the property?
Customer: replied 2 years ago.

potential recipient is my 24yr old son. the house is let on a commercial rent to a tenant who will continue in residence. I am seeking to reduce my CGT liability

Expert:  TonyTax replied 2 years ago.
Thanks.

You can have ownership of a property split between several individuals in various proportions.

If there is one owner of a house, they can give away a 10% share of it if they wish but the gift of that share will be a disposal for Capital Gains Tax purposes. If the two parties to the transaction are connected which you and your son are, that share will be treated as having been sold at the open market value which will be a proportion of the value of the whole property. Even if the parties are not connected, market value will apply if the transaction was not what is called a "bargain made at arm's length".

If you give away a 10% share every year to the same individual for a number of years it's quite possible that the tax office will say that you are aggressively trying to avoid tax and try to treat the multiple disposals as part of one bigger disposal. Whether they would succeed in such an argument at a tax tribunal is open to question. Many people use their CGT exemption every year to realise gains at that level and no more by giving away shares for instance. With a property, it can be more difficult to justify especially if the property is given away in stages.

Whatever proportions you own the property in, you and your son can split the rent as you like which contrasts with what a married couple who own let property can do as regards the division of rental income.


I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Is the cgt rate decided by my other income?

Expert:  TonyTax replied 2 years ago.
It is.

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. For 2014/15, one of the following will apply:

1 If your income in 2014/15 including the taxable gain is £41,865 or less, then all the taxable gain will be taxed at 18%.

2 If your income in 2014/15 excluding the taxable gain is more than £41,865, then all the taxable gain will be taxed at 28%.

3 If your income in 2014/15 excluding the taxable gain is less than £41,865 but more than £41,865 when you include the taxable gain, then part of it will be taxed at 18% and part at 28%.
Expert:  TonyTax replied 2 years ago.
Hi Guy.

It's been several days since I answered your question. Is there anything you need further clarification on?

Tony

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