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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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My son is selling a property that has been let out for a couple

Resolved Question:

My son is selling a property that has been let out for a couple of years (he lives abroad).
He wants to give me the equity in the flat so that I can buy a small flat to live in (I live on my own).
What would be the best solution financially for us..
Would he be liable for capital gains tax if he gives me the money to buy ?
Or would it be better if he bought the flat in his name?
It is not a huge amount of money, the equity would be around 88k after all the sales fees are paid.
Would be very grateful for some clarification .
Kind regards,
Helen
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me whether your son intends to live abroad permanently or not please. How lonmg has he been non-UK resident?
Customer: replied 2 years ago.

As things look at the moment, he will be abroad permanently. He has a permanent job in the US. He left the UK in January 2013. He does have another property here which he lets out. He has lived in both properties though

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer. There is a fair amount to get through so please bear with me.
Customer: replied 2 years ago.

Thank you . I really appreciate it and look forward to you answer

Expert:  TonyTax replied 2 years ago.

Hi again.

If you son sells the property by 5 April 2015 and makes a gain, provided he does not become UK resident again within 5 full tax years (6 April to 5 April) of leaving the UK, he will not have to pay CGT in the UK. As he left the UK in January 2013, his 5 full tax year period started on 6 April 2013 and will end on 5 April 2018. If the property was sold and he returned to the UK before 6 April 2018, the gain would be taxable in the tax year of his return to the UK. If the property has been his main home at any point, then the taxable gain would be reduced by main residence relief and letting relief.

From 6 April 2015, gains made by non-UK resident individuals on the disposal of UK residential property will be taxable in the UK but only on any increase in value from 5 April 2015. So, in effect the 5 April 2015 value will become the cost for CGT purposes. How main residence relief and letting relief which has been accrued before 6 April 2015 will be taken account of remains to be seen.

If your son gifts you the money to buy yourself a flat to live in which is in your name, you will not pay tax on the gift as gifts are not taxable in the hands of the recipient. Cash gifts are not subject to CGT. So long as your son lives for seven years after making the gift, it will not be included in his estate for Inheritance Tax purposes.

If you later sell the flat which is in your name and make a profit, the gain will be exempt from CGT so long as it has been your main home for the entire period of ownership or for all but the last 18 months of ownership which is given as a tax free period in any event should you move away.

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

Customer: replied 2 years ago.

Hi,

Thank you so much for that. It has clarified things for me and I can pass the info on to my son.

Kind regards,

Helen

Expert:  TonyTax replied 2 years ago.
Thanks.
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