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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Together with my husband we own 2 adjacent though separate

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Together with my husband we own 2 adjacent though separate flats: a 3-bedroom and a studio next door. Could we extend the property shares of the studio to include our 21 years old daughter? Is it possible that instead of 2 parents owning the studio it would be then 3 people sharing the ownership title of the studio?
We would not transfer the property title to our daughter entirely but include her into our joint ownership.
Is it possible?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.There is no limit to the number of owners that a property can have that I am aware of but no more than four names can appear on the title deeds. Its not uncommon for multiple siblings to inherit property from their parents.There would be nothing to stop you adding your daughter to the ownership of the studio by gifting her a share but you would still need to work out the capital gain position for the gift made by each of you ad your husband. You could gradually transfer the whole property to your daughter but this can attract the attention of HMRC so it needs to be done over a number of years to be safe.I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
It already sounds much better. We bought the studio 18 years ago for £ 66 000, now the value is ab 300 000 £, so the CGT would be about 45-50 000£ if we transferred the entire property.( that is what I calculated approximately)
Does it mean that if she gets just one third, the CGT would be £ 15 000- 17 000? And then we shoud pay it between me and my husband? ( him hopefully getting a relief due to living in the studio for many years )
Since at the moment we do not have £ 50 000 we try to work out how much the CGT gift position of 1 third would cost us. Could you help us with that, please?
Expert:  TonyTax replied 1 year ago.
Can you tell me what month and year the studio was bought please. Which month and year did your husband move into the property?
Customer: replied 1 year ago.
We purchased the studio in November 1997. Since it is adjacent to our family flat we were all using it like an extention of our home but I believe my husband has been living there since Feb 2004.
Expert:  TonyTax replied 1 year ago.
Thanks.

Leave this with me while I do some calculations.
Expert:  TonyTax replied 1 year ago.
Hi again.

YOUR HUSBAND

If he gifted his 50% share, he would have a gain of £117,000 (£300,000 - £66,000 / 2). The gain for the period from February 2004 to October 2015 (say), 141 months, would be tax free. That would amount to £76,375 (£117,000 / 216 months x 141 months). That leaves £40,625. The first £11,100 of that would be tax free to leave a net taxable gain of £29,525.

There are two rates of Capital Gains Tax in the UK, 18% and 28%. The rate or combination of rates that he will pay will be dependent on the level of his income in the tax year the gain occurs. Take a look here for information on how to calculate your CGT rate. The CGT liability would be somewhere between £5,314.50 (18%) and £8,267.00 (28%).

Giving away one-sixth of his share would leave a gain £19,500 of which £12,729 (£19,500 / 216 x 141) would be covered by main residence exemption and the balance of £6,771 would be covered by the annual CGT exemption.

YOU

You would have a gain of £117,000. The first £11,100 would be tax free leaving you with a net taxable gain of £105,900. The maximum CGT liability would be £29,652 (28%). If your income is not £42,385 or more, than part of the net taxable gain will be charged to CGT at 18%. That could be as much as £31,785 if you had no income whatsoever.

Giving away one-sixth of your share would leave you with a gain £19,500 with the first £11,100 being covered by the annual CGT exemption. The balance of £8,400 would be liable to CGT.

Customer: replied 1 year ago.
Your calculations make me much happier ! Thanks a lot!! Now back to your hint about the possibility for a gradual transfer of the remaining shares to our daughter: can I interpret this as a gradual release of ownership which does not exceed the annual CGT allowance? Am I right in guessing that it might take about 18 years or so?
Or is it that you had a completely different way in your mind? Could you, please, elaborate? Thanks a million!
Expert:  TonyTax replied 1 year ago.
You can gradually transfer your ownership of the studio to your daughter. I'm not sure how you arrive at 18 years as the time it will take to do it. The value of the property will change over time.
Customer: replied 1 year ago.
As the current CGT exemption is £ 11.000 x 2 = 22 000£ , and the remaining transfer value is about 200 000, so with the value increase and the exemption value increase it comes to about 18 years approx.
Is this what you had in mind or could it be done differently?
Expert:  TonyTax replied 1 year ago.
If you want to avoid CGT, then you will need to do it gradually.
Customer: replied 1 year ago.
Thank you, ***** *****
Customer: replied 1 year ago.
Is it all right to do it every year?
Expert:  TonyTax replied 1 year ago.

There is nothing to stop you doing that but there is always a risk of accusations by HMRC of aggressive tax avoidance. Many people do it so you'd be unlucky to be picked on. The annual CGT exemption is there to be used so why shouldn't you use it every year?

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15748
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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