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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15916
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have a cgt liability on an investment property. I intend

Resolved Question:

I have a cgt liability on an investment property . I intend to sell it to my son for nil consideration . He will be free to dispose of it if he wishes .He may decide to pass some of the sale proceeds to me .Your comments please
Submitted: 10 months ago.
Category: Tax
Expert:  TonyTax replied 10 months ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Expert:  TonyTax replied 10 months ago.

As you and your son are connected for tax purposes, whatever price you sell the property to your son for will be replaced by the open market value of the property sp you may have CGT to pay and no cash to pay it. If your son gifts you some of the money if and when he sells it, that is fine. You won't have to pay tax on it. Your son will have made a potentially exepmt transfer which will fall out of his estate for Inheritance Tax purposes so long as he lived for seven years after making it.

By selling the property to your son at less than market value, you will also have made a gift for Inheritance Tax purposes. Your son won't have to pay tax on it and it will remaion in your estate for seven years after making it.

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

Customer: replied 10 months ago.
I am assuming that my cgt liability will remain . What if I transfer the property to a limited company with the intention of utilizing the whole sum after disposal as business capital ?
Expert:  TonyTax replied 10 months ago.

If you put the property into a limited company, you will still be treated as having sold it at its market value which will still leave you with CGT to pay and, possibley, stamp duty for the company to pay. Take a look here for more information.

Customer: replied 10 months ago.
a trust ?
Expert:  TonyTax replied 10 months ago.

Trusts aren't as tax efficient as they used to be. If you gift the property to a trust of which you are the settlor and beneficiary it won't really work because you aren't giving anything away, hence the name "bare trust". HMRC have pretty much covered any situation where the original owner of an assets wishes to continue to benefit form it even after "disposing" of it.

Customer: replied 10 months ago.
ah shucks .
Expert:  TonyTax replied 10 months ago.

What type of property is it?

Customer: replied 10 months ago.
its a flat within a building containing a shop and 3 flats one of which is already disposed of which I have owned for 25 years + I have lived in one of the flats for the last 5 years . I have upgraded both after years of tenancy's with a view to eventual retirement .I traded from the shop until 18 months ago and it is now let .I have tax computations in place showing a tax liability using the lettings allowance in the region of £90.000 The whole property was used as a sole residence for a short period just after acquisition before becoming 2 flats .
Expert:  TonyTax replied 10 months ago.

You need to consider selling the shop if you can within three years of your busines ceasing. If you do, you may be able to claim entrepreneurs' relief which will limit the CGT charge on the pre-letting period gain to 10%.

Customer: replied 10 months ago.
Got that thanks, ***** ***** returning 8% at present which could be a problem to reproduce although not impossible . 5% ftse 100 ok and tax free dividend income possible ? up to £5000 pa
Expert:  TonyTax replied 10 months ago.

The first £5,000 of dividends are taxed at 0% but that £5,000 is effectivley part of the 20% basic rate tax band of £32,000. You can have £1,000 of tax free bank interest if you are a basci rate taxpayer or £500 tax free if you are a 40% taxpayer.

Customer: replied 10 months ago.
hi not sure when the advice cut off is .One final thing .
Just need to look at the implications of making my children partners in the building to utilize their cgt allowance . Also is the lettings allowance personal ie my children also or per property
Expert:  TonyTax replied 10 months ago.

If you gift part of your ownership to your children, that will still leave you with CGT to pay as you will be treated as having disposed part of your interest in the property to them.

I'm not sure what you mean by "the lettings allowance". If you mean letting relief, that goes hand in hand with main residence relief and is only available to someone hwo has lived in a residential property that has been their main home.

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