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bigduckontax
bigduckontax, Accountant
Category: Tax
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My wife and I have a flat that we used to let out. about 7/8

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my wife and I have a flat that we used to let out. about 7/8 years ago we gave it to our son and has lived in it since then we have not changed the deeds into his name but we now wish to that. what date do we use for capital gains tax
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Firstly did you ever occupy this flat as your sole or main domestic residence? Once I know this I can advise you further.
Customer: replied 1 year ago.
no
Customer: replied 1 year ago.
hi we have never occupied this flat. our son pays all bills inc. rates on this flat and we have not have any payment from him
Expert:  bigduckontax replied 1 year ago.
Bad news I'm afraid; you are liable for Capital Gains Tax (CGT) on the gain made on the property between the date of acquisition and the date of transfer to your son. The gain is calculated from the difference between the acquisition and selling cost. The acquisition cost is the purchase price plus buying costs including Stamp Duty or its equivalent plus and improvements eg installation of double glazing, central heating extension etc but not routine maintenance which would be allowable against rental income. The selling price will be the current market value less the conveyancing costs. Almost certainly the Valuation Office Agency (VOA), part of HMRC staffed by Chartered Surveyors, will be called in to asses the current market value as they are informed of all transactions in landed property as they occur and are thus will versed in both current and past valuations. The gain can then be adjusted to remove part of it as the last 18 months do not count as you are deemed to be in possession even if this is not the case. This proportion is calculated using months of the last 18 and total ownership period which will produce a modest reduction to the gain. From the net gain divide it in half to assess your individual exposure to CGT. You can deduct your Annual Exempt Amounts (AEA) (currently 11.1K), and the remaining balance is taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of transfer.
You also have a further problem, Inheritance Tax (IHT). By donating the property a Potentially Exempt Transfer (PET) is created. PETs run off at a taper over seven years and in the event of demise within this period are added back to your estate for IHT purposes and are the first to suffer tax. If the deceased's estate is insufficient to meet the tax on the PET it cascades down to the beneficiary for immediate payment. The classic defence against a PET is a reducing term life insurance policy. IHT kicks in at 325K with anything over 325K and is taxed at a flat rate of 40%. However the rules are changing with the Family Home Allowance in respect of children. Here is the advice from The Telegraph:
'The Government will add a “family home allowance”, eventually worth £175,000 per person, to the existing £325,000 tax free allowance from April 6, 2017.
This will be worth £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20, and £175,000 in 2020-21. This will allow individuals to pass on assets worth up to £500,000, including a family home, without paying any IHT at all. For married couples and civil partners, the total is £1m.'
I do hope that my reply has shed some light on your situation.
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
thank you, ***** *****
brian.
Expert:  bigduckontax replied 1 year ago.
So sorry to have had to rain on your parade. Please be so kind as to rate me before you leave the Just Answer site.