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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My brother-in-law and his wife are American citizens living

Customer Question

My brother-in-law and his wife are American citizens living in Chicago. About 20 years ago they purchased a house in England to use during their frequent visits to the UK. When not in use by them the house stood empty. 4 years ago they decided that, because of declining health, they would not make any more visits to the UK. They asked us if we would like to have the house as a gift. We accepted and solicitors completed all the necessary formalities. We immediately moved into the house and it has been our main, and sole, residence since that time. We are now contemplating selling the property. As it was a gift to us are there any tax liabilities on us?
Alex McLennan
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.
As the property has been your main residence for the entire period of your ownership of it, there will be no Capital Gains Tax to pay if you sell it due to the main residence exemption rules which you can read about here:
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief
Even if neither of your brother in law and his wife are UK domiciled, their UK based estates can be liable to UK Inheritance Tax if either of their UK based estates exceed the £325,000 nil-rate band that each individual is entitled to. As the gift of the property was made to you less than seven years ago, should either of them pass away before the seven year period post gift is complete, the value of the gift or part thereof in the case of the death of one of them would be included in their UK estate for IHT purposes.
Normally, IHT is paid out of the deceased estate's assets but the recipient of a gift made within seven years of the death of the donor can be liable where the deceased estate does not have sufficient funds to pay it. However, the nil-rate IHT band is first used against gifts made in the seven years before death and, even if there remains a chargeable sum after that calculation, the IHT liability tapers away gradually from the third anniversary of the gift as you can read here:
http://taxaid.org.uk/guides/information/other-taxes-you-may-need-to-know-about/inheritance-tax/828-2/taper-relief-for-lifetime-gifts
I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 1 year ago.
Hi.
I'm just following up to find out if my answer helped or if you have any further questions.

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