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I transferred a flat in London to my daughter over seven years

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I transferred a flat in London to my daughter over seven years ago.She now needs cash and I have said that I will buy it back from her.She does not need full value and my question is - can I buy it back at the price it was transferred to her,so no CGT for her to pay.Since the transfer price will be well below current market value are there any potential problems,particularly avoidance of stamp duty.Finally,because the gift was made over seven years ago I presume that the cash I pay her will not trigger a new PET for IHT purposes.?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.
Can you confirm that
1) this is and never has been either you or your daughters main residence
2) That capital gains was paid when you transferred the property to your daughter
3)What was the market value at the time you made the transfer and the market value now
Thanks
Sam
Customer: replied 2 years ago.

Thanks - never been primary residence.CGT not paid because I had sufficient accumulated losses to offset.Market value on transfer 7 years ago was £450k,value now c£700k

Customer: replied 2 years ago.

Thanks - never been primary residence.CGT not paid because I had sufficient accumulated losses to offset.Market value on transfer 7 years ago was £450k,value now c£700k.Service first class so far

Expert:  Sam replied 2 years ago.
Hi Michael
Thanks for your response and the additional information
That's fine about the original CGT position - I just needed to check.
I am afraid that the sale price at transfer will be treated at market value which will give rise to a gain to cover any shortfall in what you purchase it for, and its market value.
(So its the market value at sale less the acquisition cost)
From this shortfall - can be claimed any capital improvements that your daughter paid for during her period of ownership, and of course the first £11,000 is exempt, as this is the annual exemption allowance.
Then the balance will be liable to a mix off 18% and 28% or 28% capital gains tax (this is determined by your daughters annual income, so if she has an income in excess of £41865 then the gain will be liable to 28%.
As far as stamp duty is concerned this will again be due on the market value of the property.
And yes there will be an Inheritance tax consideration on the shortfall you pay - which will fall onto your daughters estate - so this will fall within the 7 year rule for PETs.
Maybe if you paid market value with the proviso that the additional amount over and above the original consideration, sees her funding the cost for stamp duty and capital gains.
OR she gifts it back to you - which would avoid stamp duty, as there is no mortgage (but not capital gains or the PET rules for Inheritance tax) and you then later on (preferably after next tax year, so after 05/04/2015) gift her money - which then would have a PET 7 year rule consideration on you.
Other than that I am afraid there is no other tax efficient way to manage this.
Let me know if you have any follow up questions
Thanks
Sam
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Category: Tax
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Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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