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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Do I have to pay capital gains tax on a property my mother

Resolved Question:

Do I have to pay capital gains tax on a property my mother gifted to me and my brother 8 years before we sold it in May 2013. She lived in the property some years before a nursing home. She is still alive. We also rented it commercially year before selling it and paid tax on the rental income.
The house was sold for £450,000 and was worth £350000 when acquired in 2005. We spent about £10,000 on improving the property prior to rental and sale.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

.

Can you tell me if either of you or your brother lived in the property during your ownership of it please. When exactly was the property sold?

Customer: replied 2 years ago.

I lived there 6 months on and off during 2009/10 - I didn't own another property at the time.

The property was sold on 14/05/13

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer. It will take a while as there is more than one issue to deal with.
Expert:  TonyTax replied 2 years ago.

I'm back.

You made a gain of £90,000 when you sold the property in May 2013, £45,000 of yourself and your brother.

YOUR TAX POSITION

As you lived in the property months or so, you should qualify from CGT proportion of the gain represented by that period and last 36 months of your ownership of it, excluding any overlaps of the period you lived in it and the last 36 months. In addition, as the property was let as well as having been your home, you might have qualified relief but as the property appears to have been let during the last 36 months of your ownership of it, the gain period will be exempt in any event.

So, you should get exemption from CGT least 36 months worth of your share of the gain. You will also qualify exemption first £10,900 of your gain after the deduction of main residence relief. You will pay CGT at 18% or 28% or a combination of the two rates depending on the level of his income in 2013/14 on the net taxable gain. Take a look here on the main residence and CGT.

YOUR BROTHER'S TAX POSITION

The first £10,900 of your brother's share of the gain will be exempt from CGT leaving him with a net taxable gain of £34,100. He will pay CGT at 18% or 28% or a combination of the two rates depending on the level of your income in 2013/14 on the net taxable gain.

YOUR MOTHER

As your mother continued to live in the property after gifting it to you and your brother, it was a gift with reservation of benefit. You can read about those here. The seven year countdown to the point where the property ceases to be included in your mother's estate Tax purposes will have started when she moved into the care home.

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

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