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My mother has been the legal owner of her mothers flat for

Resolved Question:

my mother has been the legal owner of her mothers flat for the last 15 years it was gifted to her ,now that her mother has died she wants to sell the flat ,what would the tax issues be ?
many thanks
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question - I am Sam and I am one of the UK tax experts.
Can you advise whether your mother lived in the flat at all - between the time her mother gifted it to her, and the date that her mother passed away.
Also whether her mother paid her market value rent - once she had gifted the property (and if not whether pre owned asset charges were paid to HMRC instead of market value rent)
Thanks
Sam
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question - I am Sam and I am one of the UK tax experts.
Can you advise whether your mother lived in the flat at all - between the time her mother gifted it to her, and the date that her mother passed away.
Also whether her mother paid her market value rent - once she had gifted the property (and if not whether pre owned asset charges were paid to HMRC instead of market value rent)
Thanks
Sam
Customer: replied 1 year ago.
Hi Sam
My mother stayed a few nights a week to help look after my nan but she did not live there , no rent was paid to my mother and no pre owned asset charges were paid to hmrc
Thanks
Mark
Expert:  Sam replied 1 year ago.
Hi Mark Thanks for your response If market rent was not paid (nor pre owned asset charges to HMRC) then for Inheritance tax purposes this property cannot be treated as a gift as your Nan continued to make full use of it after she had "gifted it" and dis not pay rent to the new owner (your mother) This means that the flat will be treated as a reservation with benefit, which means that it will have to added to the value of your Nans estate (which only really matters if the value of this flat plus her other assets/money/goods add up to more than £325,000) so I do urge legal advise to be taken to finalise the estate. BUT because an attempt was made to "gift" the property and I assume the property with the land registry is in your Mums name, then she will have a capital gain liability to bear on sale of the flat.This will be formed by the difference in value between the sale price and the value at the time the property was gifted to her - which will form the initial gain. From te initial gain can be deducted the costs to sell (so legal and estate agent fees) plus the costs for any capital improvements - such as new kitchen or new bathroom Then whats left over - the first £11,100 will be exempt, as this is the annual exemption allowance, with any remaining profit liable to 18% or 28% or a mix of both The rate paid is determined by your Mums usual annual income and how much unused basic rate band she has.Mum should alert HMRC as soon as the sale has taken place so they know to expect a self assessment tax return to declare the gain. Let me know if you wish me to expand any further or need any further assistanceThanksSam
Sam, Accountant
Category: Tax
Satisfied Customers: 13810
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Customer: replied 1 year ago.
Thanks very much
Expert:  Sam replied 1 year ago.
You are very welcome Mark

Thanks

Sam

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