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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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Bought a house for £30000 from a relative who remained in the

Resolved Question:

Bought a house for £30000 from a relative who remained in the property for 10 years (from 2005) rent free. The property is now worth £230000.
Since purchasing the house I have got married and purchased another property in 2013.
What can I do to limit the CGT which I will have to pay.
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Please advise -
Was the property your main residence during period of ownership?
If so, for how long?
When did you move out of the property - month and year?
Is the property in your sole name?
advise month and year of purchase

Many thanks
Customer: replied 2 years ago.

Ref above:

Have never lived in the property as my relative was living there.

Property in my name.

Purchased the property in August 2005

Expert:  taxadvisor.uk replied 2 years ago.
Bob, thank you for your reply.

Based on information provided this property is a second home and therefore the whole gain becomes chargeable to CGT, I'm afraid.

You would be able to offset the following additional costs against the gain before arriving at the chargeable gain, namely:

- capital costs of improving the property
- costs associated with buying and selling the property - conveyance costs
- agent's fee on sale, if any.

The rest would be chargeable after allowing capital gains allowance (£11k per person).
You could mitigate your CGT payable by transferring an interest in the property to your wife and claiming 2 sets of gains allowance and also making use of lower CGT rate of 18% provided the total income of each owner is at basic rate tax threshold for income tax.

I wish I could give you a more favourable answer.

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. Please only rate it if my answer is acceptable to you.

Customer: replied 2 years ago.

What would be the pros/cons if I now rent the property and then sell it within 18months?

Could I sell the property to another relative for a nominal price?

Do I have to produce all receipts for work that has been undertaken?

Can any expenditure to the property be used to offset CGT?

Expert:  taxadvisor.uk replied 2 years ago.
Bob, thank you for reply.

[q]

What would be the pros/cons if I now rent the property and then sell it within 18months?

[a]
It would make no difference as the property was never your main residence. All gain would be subject to CGT.

[q]

Could I sell the property to another relative for a nominal price?

[a]
You have to be careful.. if you sell the property to a connected person/family member at below fair market value, HMRC would use the market value for CGT purposes and not the sale price.

More information on this can be found here

http://www.thisismoney.co.uk/money/experts/article-1709917/Can-we-sell-our-son-a-flat-on-the-cheap.html


[q]

Do I have to produce all receipts for work that has been undertaken?

[a]
You should have proof of payment to support the costs in the event HMRC make an enquiry.

[q]

Can any expenditure to the property be used to offset CGT?

[a]

The answer is yes..but only capital improvements and not repairs and maintenance costs

I hope this is helpful and answers your question.

taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Good luck.