I have tried to respond but it would not take my reply. To answer your question the holiday home was used only by ourselves and the family. It has never been let out for rent.
Hi again.If you gift the holiday home to your children, there may be Capital Gains Tax to pay by you as you cannot holdover a gain on a non-business asset until a subsequent disposal I'm afraid. The value of the property at the time of the gift will be the deemed disposal proceeds for CGT purposes. Your cost for CGT purposes will be the sum of half the original purchase price of the property and half the value of the property at the time of your wife's death. The first £11,000 of gains you make in the current tax year will be exempt from CGT. Any taxable gain will be charged to CGT at 18%, 28% or a combination of the two rates depending on the level of your income in the tax year of disposal.The cost for CGT purposes of the property to your children will be its value at the time of the gift. They will I assume own one-third each.As well as being a disposal for CGT purposes, the gift will be a potentially exempt transfer for Inheritance Tax purposes. So long as you live for seven years after making the gift, it will not be included in your estate for IHT purposes. You can read about IHT here and here.You should be aware of the gift with reservation rules which you can read about here and here.You may have heard of the deed of family arrangement or variation rules which allow a will to be varied within two years of the associated death so that assets left to one or more individuals can be re-directed to one or more other individuals so long as all the affected parties agree.Since you are unlikely to have a gain on the share of the property you inherited from your wife and that it will have been an IHT exempt transfer under the spousal exemption rules, there is probably nothing to be gained by a deed of variation in this instance. If the half share was redirected to your children by such a deed, it would make it a chargeable legacy for IHT purposes though your late wife would have had her nil-rate IHT band to use. The ownership arrangement, tenants in common or joint tenants, may have had an impact on the ability to execute a deed but I'm not a property lawyer so I cannot advise you on that.I hope this helps but let me know if you have any further questions.