Thanks for your question - I am Sam and I am one of the Uk tax experts.
THis sale will give rie to capital gains in your daughters name, as
1) the property was placed in her name and
2) It has never been your main residence.
The gain will be established as the sale price less than purchase price, this forms the initial gain, From this initial gain she can then deduct the costs to buy and sell (such as legal and estate agent fees, if in her name) and the costs for any major capital improvements )again these muct be in her name) - then with any gain left over, the first £11,000 will be exempt as this is her annual exemption allowance, and any rmining gain will be liable to capital gains tx.
Plus as you wish to claw the money bck, she will then be considered for Inheritance tax, as she is, in essence "gifting" the money back to you, so she too, must allow 7 years to l;apse so that this is not considered for Inheritance tax purposes.
Let me know if you have anything you wish me to expand on, asthis is just th gist of the situation, and I am more than happy to expand on any elements of my response.
Thanks for your response
Whoever receive the proceeds sadly will not change the legal capital gain position - as the property is in your duaghters name - so the gain arises on her. Even if you transferred this property into your name prior to the sale, the very act of making this transfer would trigger a capital gain still on your duaghther.
All you can do is let the sale go though - get your daughter to declare the gain - and you pay her capital gain bill - (but note if the bill is more than £3000 then this "gift" starts another IHT consideration- with the need for 7 yaers to lapse for this to be then disregarded.
The sad situation is that the process you put in place to avoid Inheritance tax - by placing this purchase in your daughers name - is not having to be paid through capital gains, there is never a property tax effiecnt ay to proceed, UNLESS the original plan had stayed on tact (i.e. leving the property in your daughters name, but wven then any sale she undertook would ALWAYS have created a capital gain scenerio)
Let me know if I can be of any further assistance, but it would be appreciated if you could rate the level of service I have provided, as this ensures that Just Answer credit me for my time.
Thanks for your further response
As you have already survived 7 years from the date of making this gift, your Inheritance tax position is no longer an issue.
A sale yes triggers the capital gain position for your duaghter as she is selling a property which has not been your her main residence, and then whether she gifts the sale proceeds to you OR they end up directly in your ban account following sale, she then also has an Inheritance tax position to consider - as she is then seeing to be gifting the money to you.
However - this WILL affect her tax credits - even if the money goes directly to you. .
And I have to advise that as this tax credit position is a new factor, and not originally advised on with your orginal posting, as per Just Answer policy this really should be listed as a new question or I can extend your Q & A time if you wish with this original post.
I have issued a request for more Q & A time to deal with your additional position and questions re the tax credits and your daughter
I never came back for the supplementary question around tax credits as I believe I now understand the implications. However, I would like to draw attention to my original question and the point that I made re my use of my daughters flat. I stayed there on and off/semi regularly for work purposes during the first 2 years. Does that have a tax impact if the flat is sold and the cash gift made to me? Someone suggested to me that I "reserved a benefit" which will give me a tax liability of some sort. Is that true, as you never mentioned it in your original reply, only a CGT implication?
Thanks for your furtehr question
Your stay there ahs no iplcations - reserve with benefit applies for Inheritance tax when a property you won is gifted - and you remain in a position of benefiting from its use .
This is not the case here - so the capital gain position remians as you daughters and then she will have an Inheritance tax position re gifting the proceeds to you.
Thanks, ***** ***** clarify things.
You are very welcome