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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My father in law gifted us property

Resolved Question:

My father in law gifted a property to my husband and I in Nov 2006 at which point we moved into the house with him. We lived in this property completely as our home, relocated schools etc. However the arrangement did not work out and we moved out in July 2007 and bought another house, leaving my father in law in the property. He then moved to a smaller property in March 2008 at which point we sold the house. Are we liable for both iht and cgt or can we claim ppr?

Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

I am another tax expert on this site and the question has become available for any expert to answer. I can help you.

Please advise the following

The value of the property
- at the time it was gifted to you in Nov 2006
- at the time of sale in Mar 2008
- were your names put on the Land Registry records when the property was gifted to you?

Many thanks
Customer: replied 3 years ago.

Hi,

Thanks for your response. The property was valued at £130000 when gifted and we sold for £151000.

My husband was on electoral role but for some reason mine never was.

Thanks

Expert:  taxadvisor.uk replied 3 years ago.
Sonya, thank you for your prompt reply.

Based on information provided, you appear to have made that property your home albeit for a short period.

HMRC requires you to notify them within two years of acquiring a second property as to which property is your main residence. It is not clear from information provided whether this was done.

The fact your husband was on the electrol role with that address would support your claim that it was your main residence.

The gain of £21,000 less any costs associated with sale of the property would qualify for private residence relief and there would be no CGT payable.

Gains allowance for tax year 2007-08 was £9,200.
In the event HMRC contested your claim for PRR, in the worst scenario only (21,000-(9,200x2)) £2,600 would be chargeable to CGT.

You should have reported the gain in your tax return for 2007-08.
You are not liable to IHT.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

So would we not pay cgt on the total amount?

Expert:  taxadvisor.uk replied 3 years ago.
Sonya, thanks for your reply.

The valation in Nov 2006 becomes your cost price for CGT purposes.
You pay tax on the gain, i.e. selling price less cost price.

I hope this is helpful.
taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes.