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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I gave half my flat just outside London to my brother last

Customer Question

I gave half my flat just outside London to my brother last year (it's mortgaged), after he got rid of my bad tenant and did lots of repairs for me when I was incapacitated after a car crash. I agreed to give him half the flat at the value I originally paid for it with the intention that we will keep it as a joint asset for years and handle the renting of it together and the payment of the mortgage. We have not yet changed the deeds, the mortgage or the land registry. Will I have to pay capital gains tax on this gift to him as the agreement was at the value I originally paid for it, so not really an arms length transaction? Or will this only be when we sell it and actually make a gain?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. What you paid for the flat is only relevant insofar as the calculation of any gain you are deemed to make as a result of the gift to your brother is concerned. If you gift your brother a 50% share, it will be treated as both a potentially exempt transfer for Inheritance Tax purposes and a gift for Capital Gains Tax purposes. As far as IHT is concerned, if you die within seven years of making the gift, its value will be included in your estate for IHT purposes. Taper relief will apply from three years after the gift is made. You can read about that here. As for CGT, since you and your brother are "connected" the gift will be treated as a part disposal of your interest in the flat and the deemed proceeds for Capital Gains Tax purposes will be the value of the 50% share you give away and you may have CGT to pay depending on whether the property was ever your main home as well as being let. Read about main residence relief and CGT here. There will only be stamp duty to pay if the share of the mortgage that your brother takes responsibility for is more than £125,000. Look here for more information on stamp duty and property transfers. I hope this helps but let me know if you have any further questions.