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bigduckontax, Accountant
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I am selling a property that was transferred to me by my mother

Customer Question

I am selling a property that was transferred to me by my mother 15 years ago. My mother died in January 2014 and lived in the property from the transfer to her death, remaining responsible for all bills, but not paying me any rent. 18 months ago she received a grant to make essential improvements to her property which I now have to repay unless I wait 8 years.
My question relates to cgt. As I understand it I will have to pay 18 per cent of the difference between the value at time of transfer and the sale price. Is this correct? Also how does the £11000 exemption work? Would I be able to transfer a share of the property to my husband and then claim £22000 as a couple? Finally would I be able to claim the amount of the grant I have to repay, thereby reducing the taxable profit?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.

The grant, which you say you have to repay, was for the improvement of the property, correct? If so then the cost of these improvements is added to the value as at the time of gift and would thus reduce any gain on disposal. If you also occupied this property then you would be entitled to Private Residence Relief (PRR) which would reduce any gain by 100%. It is also possible to establish an entitlement to PRR by moving into the property on your mother's decease and living there for a time, if you did not live there already. General consensus from experts on the JA site is that such a move would need to be for at least a year.

CGT is assessed on the net gain and is levied at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale; the 18% rate for the unused 20% trance of your income and 28% thereafter.

You have an Annual Exempt Allowance (AEA) of 11K. If you made say a 20K gain only 9K would be assessed for CGT. You and your husband cannot both have an AEA for the same property so the transfer you propose is a dead duck, sorry. However, another loophole appears; this is Lettings Relief (LR) which is available up to 40K. Your mother was a tenant albeit at a peppercorn rent and from HMRC's advice site LR would appear to apply.

I do hope I have shed some light on your conundrum. You may need local professional advice on this matter. The solicitor who handles the conveyance should be able to assist in CGT problems.
bigduckontax, Accountant
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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