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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15917
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My mother and father gifted me their property 11 years ago,

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my mother and father gifted me their property 11 years ago, which I remortaged and took 20k out for them to enjoy and me to clear a bit of debt which they knew about. my mum passed 8 years ago and 6 weeks ago I lost my father. in the bank after funeral costs etc there was 21k, there is a car which is worth no more than 3.5K. when the house became mine it was worth 100K and todays market about 140K. November 2014 I purchased property with my partner and didn't realise the implications...... that I need to nominate a primary home, that I will have to pay capital gains and that all would have been ok if I my parent hadn't out of kindness done what they did.
the house was my growing up home and I am 45 and I have lived in for the best part of 40 years on and off and for the 5 away I have stayed most weekends. . . . . for the last 8 years he lived with me either in my new home or in our family home as age got the better of him, never once have I been deceitfull to our country and claimed careers allowance etc and just now feel I am in a bit of a no win situation and will now be punished for something my parents thought they were doing right to benefit me . . . . help or advise what I need to do eg going to a solicitor or accountant
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
the house has not had any improvements or additions other than new boiler and bathroom which is standard. . . . . i just need someone to say you owe xyz or nothing as i am not wanting to sell for a gain it is just to far away for me to now manage and i have no family left to travel to other than my partners which will not be weekly anymore as was when my dad was alive
Expert:  TonyTax replied 1 year ago.

Hi.

Can you tell me when exactly (month and year) your parents gave you their house please. Were you living there at the time? You say for the last 8 years your father lived with you either in your new home or in the family home. By family home do you mean the one he and your mother gave to you 11 years ago?

Customer: replied 1 year ago.
Hi there
July 2005 signed over to me and yes i was living there when all was signed and sealed via solicitors and noted as a gift.
this was my parent only home since getting married and was purchased in May 1956 I believe.
Sorry i was giving you a little wrong info re the 8 years - my mother passed away and my dad became lonely and i was an only child and he took to me for comfort . . . . i worked away through the week down in leamington spa and he sometimes paid visitis here and stayed for long weekend or through the week and then i came back to the child home when he wasn't down in the week. . . . hope this makes sense?
Expert:  TonyTax replied 1 year ago.

Thanks. Did you live in the home that was gifted to you 11 years ago until November 2014 when you bought a new home?

Customer: replied 1 year ago.
im now in a pickle but clearly don't want to be in serious trouble for something that was done as a gift of kindness from my parents. so sorry to bother you and than you for any advise you are able to give
Customer: replied 1 year ago.
not full time no just weekends
Customer: replied 1 year ago.
or holidays if not away out of the country
Expert:  TonyTax replied 1 year ago.

I got the impression from the question that as you didn't buy a property until November 2014 that you had lived in the property gifted to you by your parents. You also said you lived in it for 40 years. Did you own and live in another property before November 2014? When did you move out of the "family home" originally?

Customer: replied 1 year ago.
No it was gifted 11 years ago and signed and sealed by a solicoitor.
The same year i remortaged the house for some finance for my mum and dad and myself to pay off some debts.
This house that was gifted was is my growing up home and in essence i have had the pleasure of living init for 40 years continually with exception of the last 5 which has been on and off due to work. 3 years in one property and the last 18 months in another of which i am in a mortage with my partner
Customer: replied 1 year ago.
within the last 5 i have been at my growing up home every weekend.
my parents/parent lived in the home paying the usual debt council tax gas electricity etc
i just paid the remortage
Expert:  TonyTax replied 1 year ago.

Thanks.

Leave this with me while I draft my answer.

Customer: replied 1 year ago.
thank you so much
Expert:  TonyTax replied 1 year ago.

If you forget about claiming any main residence relief for a minute and you sell the property for £140,000 you will make a gain of £40,000 (£140,000 - £100,000). That seems like a small increase over 11 years, though there was a crash in 2008 and 2009. The first £11,100 of he gain would be tax free and you would be left with a net taxable gain of £28,900. There are two rates of CGT for property, 18% and 28%. The rate or combination of rates that you would pay would be determined by the level of your income in the tax year you sold the property. So, your CGT liability will be somewhere between £5,202 (18%) and £8,092 (28%). Take a look here for information on how to work out the precise tax you would pay.

You have two years from when you own more than one home to make an election for one or the other to be treated as your principle private residence. For a home to be treated as such, you have to spend some time there which you clearly did. However, HMRC may challenge any such claim but only after you have sold the property and made the claim for main residence relief in your tax return. If you do make the election, for the old family home to be treated as your main home, you leave any gain you may make on the November 2014 property exposed to CGT if and when you sell it. There would appear to be nothing to lose by making the election but that will depend on how much longer you own it. The longer you do the more exposed any gain on your November 2014 becomes. If HMRC refuse to given you any main residence relief for the family home, then you would not lose out on the November 2014 property at all as far as main residence relief is concerned. Take a look here for information on the main residence and CGT.

When a gift is made in circumstances such as yours and the donor continues to live there, it is called a gift with reservation of benefit. This means that if the donor dies within seven years of making the gift its value at that time forms part of their estate. Your mother died within seven years but I doubt her estate was worth more than £312,000 or £325,000 depending which tax year she died in (see here) so there would have been no Inheritance Tax to pay. The same would have applied to your father when he died, ie the 50% share of the property he owned should be included in his estate for IHT purposes.

I hope this helps but let me know if you have any further questions.

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