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bigduckontax
bigduckontax, Accountant
Category: Tax
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I wish to gift a commercial property to my daughter. She wants

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I wish to gift a commercial property to my daughter. She wants to develop into a home and will pay me £400 per month instead of a mortgage, which she might not get. How can I avoid Capital Gains tax. It is valued at £15000 but I will not see any gain.
Regards David.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello David, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Firstly the gift will create a Potentially Exempt Transfer (PET) in your inheritance Tax (IHT) affairs. PETs run off at a taper over seven years and in the event of a donor's decease are added back to his estate for IHT purposes. PETs are the first to suffer IHT and in the event of your estate being unable to meet the IHT on the PET the liability cascades down to the beneficiary fro immediate payment. The classic defence against the PET is a reducing term life insurance policy. IHT does not lick in until your estate exceeds 325K plus any inter spousal or charitable bequests and is then at a flat rate of 40%. Your gift will count as a disposal for Capital Gains Tax (CGT) and you will be liable for this tax on any gain from acquisition price to current market value. The acquisition price is the purchase price plus purchase costs including stamp duty plus any improvements. Without details of how much it cost you I am in a bit of a cleft stick regarding the quantum of CGT as your question does not indicate what you paid for it. However, you do have an Annual Exempt Amount [not cumulative] of 11.1K to offset the gain so supposing the premises cost you nothing there would be only 3.9K exposed which at a worst case scenario of 28% CGT would amount to a tad over 1K. I do hope that I have shed some light on the tax position for the pair of you.
Customer: replied 1 year ago.

Thanks for your reply. The property cost me £10,000 and can find bills for

about another £ 5,000. We are talking 25 years ago. Value now is £150,000 (sorry I left a 0 off before,) But I get the picture, I can look forward to a large tax bill even though I have seen no money.

Thanks for your help.

Regards David.

Expert:  bigduckontax replied 1 year ago.
Regrettably that is so unless you have occupied the property yourself at some time as your sole or main domestic residence. Was it ever let out and did you occupy before or after the letting period? Otherwise your capital gain is 150K - 10K - 5K * 11.1K = 123.9K which will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale. The worst case scenario is a tax bill of some 34.7K. I am so sorry to have to rain on your parade. Please be so kind as to rate me before you leave the Just Answer site.
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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