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Sam
Sam, Accountant
Category: Tax
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My father transferred his house that he bought for £5000 in

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My father transferred his house that he bought for £5000 in 1965 to my brother and me in 2007. He continued to live in it to October 2013 then entered a residential home where he still lives. My brother and I want to sell the house and it is valued at £200,000. What are the tax implications if we sell it in our names now?
Should we transfer it back to his name as, I assume, no tax would be paid on the sale of his primary residence. At 97 years old and in fast failing health we could wait for death to receive all monies in probate (not that his death is hoped for!).
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.
Both you and your brother will be liable for capital gains tax whether you sell OR transfer the property back into your fathers name.
I assume your father has been paying your market value rent as he continued to benefit from an asset that he gifted to you? If not then not only have you a consideration for pre owned asset tax (an annual charge) but also that the property will not be treated as a potentially exempt transfer for Inheritance tax purposes.
You are right that he would not have suffered a capital gain when in 2007 he transferred the property into you and your brothers name, as this was his main residence at the time, but as this is not you and your brothers main residence you WILL incur a capital gain for sale or tranfer back.
I have also added a link regarding the pre owned asset tax position
https://online.hmrc.gov.uk/information/help?helpcategory=selfAssessmentFiling1112&affinitygroup=&helpid=benefitFromAssetsHelp
Let me know if you wish me to expand on any element of my response
Thanks
Sam
Sam and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Thank you for your helpful answer. My father paid no rent whilst living in the house. Given the figures I provided can you give me a very rough estimate of the amount of tax to be paid or the percentages involved?

Expert:  Sam replied 2 years ago.

Hi Philip

Thanks for your response

Can you advsie the 2007 value please

Thanks

Sam

Customer: replied 2 years ago.

The value in 2007 (at the height of the housing market) was 215,000.

Expert:  Sam replied 2 years ago.
Hi Philip
Thanks for your question
Then you have made a loss on the capital gain position of £15,000 (as its the sale value less the acquisition value) so that's £7500 each for you and your brother.
So either a sale of transfer would not give rise to a capital gain charge, but you will need to establish whether you have a pre owned asset charge arising.
But it basically looks at what rents could have been collected at market value x highest rate of tax.
And I would suggest you engage the services of a local accountant to examine whether this can be treated as a gift with reservation OR remains as a potentially exempt gift, and this is not something we can get into in a forum such as this due to the complexities of whether the charge arises!
Also I should point out that as this has not been your father main residence since Oct 2013, then you father might also have a capital gain position if he sells, as his period of ownership from Oct 2013 to the sale date will see this NOT having been his main residence, so any profit made between transfer and sale date will be considered for capital gains. ( The first £11,100 is the annual exemption limit and any remaining gain then charged at 18% or 28% or a mix of both)
This is also affected by whether the property remains a gift with reservation so you can appreciate the sense in engaging an accountant who is familiar with both Inheritance tax, Capital gains tax and pre owned asset charges!
But you can at least be assured that YOU and your brother will not have a tax bill arising for any capital gains and its a case of just weighing up the considered ownership status on your father to weigh up the most tax efficient way to move forward (either gift with reservation - no pre owned asset charge OR capital gains on your Dad) OR potentially exempt gift (where you could have pre owned asset charges arising, and also Dad incurring capital gains if you transfer the property back into his name)
Let me know if I can assist any further
Thanks
Sam
Customer: replied 2 years ago.

Sam, thank you very much indeed. You have earned a good nights sleep.

Expert:  Sam replied 2 years ago.
Hi
You are very welcome :) Ohh sleep - I can hear the bed calling me !
Sam

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