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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Does a Capital Gains Tax liability arise when a father gifts

Resolved Question:

Does a Capital Gains Tax liability arise when a father gifts to his son the father's 50% share (present Value of share £225K) of an apartment bought jointly by father and son say 10 years ago (cost £125K) ?
The son is a UK resident the father has a home in the UK but has been a Non-Resident in the UK for tax purposes for the last 10 years ?
The son has no plans to sell the flat in the near future.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me if the property is in the UK or overseas please?
Customer: replied 2 years ago.

Property is in the UK

Expert:  TonyTax replied 2 years ago.
Thanks.

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

Hi again.


The gift to by the father of his share in the UK property to his son is both a disposal for Capital Gains Tax purposes and a gift for Inheritance Tax purposes.

CGT

As he is a long term non-UK resident, the father will have no Capital Gains Tax liability in the UK if he gives his son his share of the property by 5 April 2015. The rule for somebody who left the UK by 5 April 2013 is that if they dispose of an asset they owned before they left the UK whilst non-UK resident there would be no CGT liability in the UK so long as they did not return to the UK to live within five full tax years of leaving.


The five full tax year period started on the first 6 April after the father left the UK so he has clearly met that condition to escape UK tax on any gain. The son will acquire the second half of the property with its open market value being the cost for that share. If the gain had been taxable on the father, the deemed proceeds will have been the open market value of the 50% share.

From 6 April 2015, gains made by non-UK residents on the disposal of UK residential property will be subject to CGT in the UK but only on the difference between its value on 5 April 2015 and the disposal proceeds.

IHT

So long as the father lives for at least seven years after the date of the gift, the value of that gift will fall out of his estate for UK Inheritance Tax purposes. Otherwise, it will be included in his estate but may be subject to taper relief which you can read about here. You might also be interested in the HMRC page on who pays Inheritance Tax in different situations which you can find here.

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

TonyTax and other Tax Specialists are ready to help you
Expert:  TonyTax replied 2 years ago.
I have to go out for about 30 minutes but will be back to answer any follow up questions you may have.

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