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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15917
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I would be grateful if you could answer my query: 1)

Resolved Question:

I would be grateful if you could answer my query:
1) My mother bought a property in 1994 for the amount of £68,500.00
2) My mother name & brother name is ***** ***** the mortgage but, my brother has never made a mortgage payment only my mother made mortgage    payment
3) My brother has never live in the property
4) The value of the property as at Jan 2016 is £450,000, the property was value by a estate agent
5) My mother is at present undertaking legal advice from a solicitor regarding writing her Will
6) My brother will transfer his 50% share of the property over to my mother.
Please answer the following:
1) How much CGT will my brother be charge ?
2) Will it be possible to reduce his CGT charge ?
3) How will he made the payment to HM Revenue & Customs via self-assessment ?
4) A friend explain to me that my brother will not have to pay CGT because, his gain have been transfer over to my mother and he will not gain a penny?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. You say that your mother bought a property in 1994 but that your brother will transfer his 50% share. Why does your brother own 50% of the property? Is his name on the title deeds?
Expert:  TonyTax replied 1 year ago.
I've now seen your questions which weren't there when I posted my response.
Expert:  TonyTax replied 1 year ago.
I'm drafting my answers to your questions now.
Customer: replied 1 year ago.
My mother is at present writing a will and her solicitor stated because my brother name is ***** ***** mortgage, he own 50% of the property.
Please note my brother hasn't made any payment toward the mortgage on the property and has never live in the property.
Expert:  TonyTax replied 1 year ago.
1 If your brother transfers his share of the property to your mother, he will have made a gift for Inheritance Tax purpose and a disposal for Capital Gains Tax purposes. As far as the gift is concerned, so long as your brother lives for seven years after making the gift, its value will not be included in his estate for IHT purposes. As your brother and his mother are "connected" for CGT purposes, he will be treated as if he had sold his share of the property to your mother at the open market value and will make a paper gain of £190,750 (£450,000 - £68,500 / 2). There is no holdover relief available for such a transaction I'm afraid. The first £11,100 of the gain would be exempt from CGT leaving a net taxable gain of £179,650. There are two rates of CGT, 18% and 28%. The rate or combination of rates that your brother will pay will be dependent on the level of his income in tax year he disposes of his interest in the property. The maximum amount of the gain that can be taxed at 18% is £31,785 but that is only if his income is less than £10,600, the personal allowance.The least amount of the gain that can be charged at 28% is £147,965 (£179,650 - £31,785). Each £1 of income your brother has over £10,600 assuming a disposal in 2015/16 decreases the amount of the gain that can be charged at 18% by £1. 2 Not unless he moves into the property to get exemption for the gain for the last 18 months of his part ownership of the property as a proportion of the whole gain. HMRC may challenge such a claim on the basis that it is being done purely for tax reasons. 3 If the transfer occurs by 5 April 2016, the CGT will be due for payment on 31 January2017. The gain would be disclosed to HMRC in a self-assessment tax return. 4 Your friend is incorrect. I hope this clarifies things for you but let me know if have any further questions.
Expert:  TonyTax replied 1 year ago.
The only way out of a big CGT liability that I can see is for your mother and brother to claim that it was never his intention to own a share of the property, that he has never believed that he has owned a share and that his name is ***** ***** mortgage because the lender wanted it to be there as additional security, without which your mother would not have got the mortgage.
Expert:  TonyTax replied 1 year ago.
I'm just following up to find out if my answer helped or if you have any further questions.
Customer: replied 1 year ago.
(Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Expert:  TonyTax replied 1 year ago.
I've sent a phone call offer.
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