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TonyTax
TonyTax, Tax Consultant
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Myself and two siblings equally own a property. (1/3 each)

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myself and two siblings equally own a property. (1/3 each) we were given it on the death of our grandmother approximately 22 years ago. we now wish to give it to my 3 children equally.
As it will be a gift, what if any CGT is due? If CGT is due, so when will it be calculated from. - unfortunately all deeds to the property have been lost so we do not know the value when we inherited the property but assume about £80,000. it is now valued at £300,000.
Can we each claim our annual allowance for CGT (assuming no other gains) is there any taper relief?
Submitted: 6 months ago.
Category: Tax
Expert:  TonyTax replied 6 months ago.

Hi.

Leave this with me while I draft an answer.

Expert:  TonyTax replied 6 months ago.

If you each give away your 1/3rd shares of the property, they will be both gifts for Inheritance Tax purposes and disposals for Capital Gains Tax purposes.

The gifts will be valued at the time they are made and will stay in each of your respective estates for seven years from the time they are made. Take a look here for information on Inheritance Tax.

The cost of the property for CGT purposes will be its probate value, ie the value when your grandmother passed away. So, if the probate value was about £80,000 and you sell it for £300,000, you will each make a paper gain of £73,333 if you give it away. Assuming, none of you have lived in the property during your ownership of it, the only relief you will each be entitled to will be the annual CGT exemption or tax free allowance which currently stands at £11,100. You would each have a net taxable gain of £62,233. This can be reduced by deducting the costs of selling the property (legal fees, selling agent fees etc). There is no taper or inflation relief I'm afraid.

There are two rates of CGT on residential property, 18% and 28%. The rate or combination of rates that you will each pay will be dependent on your respective incomes in the tax year you dispose of the property. Take a look here for information on how to work out your CGT rate.

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

Customer: replied 6 months ago.
thank you, as, (unfortunately) expected! we do not have any of the papers for my grandmother's probate, but do we use the value which will be held at the land registry?
I wish to carry out significant work on the property, - moving kitchen, replace heating system, repair soak-aways, re-do roof etc. The cost of this will most likely be more than the increase in value. Can we claim the expense of doing these repairs and improvements in anyway?
There has been work on improving the bathroom etc in the past, if I still have the receipts can these improvements also be claimed as expenses?
Expert:  TonyTax replied 6 months ago.

General repair costs would normally be deductible from rental income. If you incur renovation and improvement expenditure of the type you have indicated before selling then you can add the costs to the probate value of the property, thereby reducing any gain.

I'm not sure that the Land Registry will hold the probate value. HMRC sometimes use the District Valuer to review estimated property values. The DV has access to historic property sale prices. I'm afraid that the online property sale price records available now don't go back 22 years. Council Tax started in 1991 and the values used at the time still determine the council tax band today so that would give you an idea of the value.

Customer: replied 6 months ago.
thank you very much. - quick and succinct replies in plain English. - much appreciated!
Expert:  TonyTax replied 6 months ago.

Thanks.

Would you mind rating my answer before you leave the site please.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15755
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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