Thanks for your reply.
My sister and I bought the flat in 1988 as owners, not tenants with a long lease at the time. I can't tell you exactly which month we bought the flat but I think it was in the summer of 1988. I already have tax advise about Capital Gains Tax. My question to you concerns the following:
What are the benefits (if any) of me giving my share of the flat to my sister so that she can continue living there indefinitely and the other points clearly stated in my question to you. Please would you re-read my original question regarding all these issues in paragraph two and three and give me your reply concerning them.
I did read the question and I will answer it below. For your information, the definitions of joint tenants and tenants in common are here. The reason I asked was because if the property is owned as tenants in common, you can sell your share without your sister's agreement. As joint tenants, you have to act in tandem.You've summed up your position pretty well. If you give your sister your half of the property, it will be both a disposal for Capital Gains Tax purposes and a gift for Inheritance Tax purposes. So, you will have a CGT liability and possibly no cash to pay it and, should you not live for at least seven years after making it, the value of that gift will remain in your estate for IHT purposes. Of the "gain" you will make, the proportion covered by your occupation of the property and the proportion covered by the last 18 months of ownership will be exempt from CGT. You also have a CGT exemption for the first £11,100 of the net gain.The only advantage you will get from inheriting the property when your sister dies is that your cost for CGT purposes will be its value when she dies assuming you gift her your half. You could then sell it or give it away tax free before it rises in value again. In the meantime, however, your sister would expect you to give her your half and there is no guarantee that you will survive your sister or that she will leave the property to you or your daughter in her will.What you could do is to get your sister to agree to a pay you rent for your half of the property so that if it is ever sold, you could claim letting relief which will reduce the taxable gain by a maximum of £40,000 depending on the facts and figures. Take a look here for more information on that. Even a nominal rent will open up letting relief to you.I hope this clarifies your position but let me know if you have any further questions.
Thanks for this information which is very helpful. However, if I were to claim letting relief, would the fact that I have never received any rent or any income at all from my sister from 1992 to the present - 23 years - minimise any claim for letting relief which I might receive 'depending on the facts and figures'? I would not be able to show any regular payments from my sister to me in my bank statements during these years as there has never been any payment made to me by my sister as neither of us was aware of any Capital Gains Issues.
I look forward to your reply.
You would get letting relief based on the number of years of letting, clearly not for the period to date. As the gain for the last 18 months of your ownership would be exempt in any event, letting relief would not apply to those months. See example 9 in HS283 here.
Therefore, can you confirm that if my sister starting paying me a nominal rent from now on, this would open up further letting relief and reduce the final Capital Gains Charge?
Also,what would you consider a 'nominal' but acceptable rental charge per month to satisfy a future tax assessor?