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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4338
Experience:  FCCA FCMA CGMA ACIS
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My father is 91 and has just gone into a nursing home. He

Customer Question

My father is 91 and has just gone into a nursing home. He has less than £650,000 in his estate. There will be no inheritance tax to pay. He owns a second house which is rented out to my sister. I have power of attorney and have been asked to see if gifting the house is a viable proposition.
From the research I have done it would appear that Capital Gains Tax would apply on the second home and the difference between what he bought it for and what it is worth now.
He is also paying for the care home fees and gifting could be seen as a deliberately depriving the estate. My sister is part of his will and the house will go to her eventually. I have also heard that if you are a tennant in property it can't be considered for Care home fees. She has been in the house for around 6 years.
Thanks
Submitted: 7 months ago.
Category: Tax
Expert:  bigduckontax replied 7 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

First point, in which part of the UK does your father live?

Secondly, he has only 325K tax free in his Inheritance Tax (IHT) affairs unless he has inherited his late spouse;s unused tax free portion. Please confirm that this is the case.

Customer: replied 7 months ago.
He lives in England and yes he has inherited my mums inheritance figure so has £650,000
Expert:  bigduckontax replied 7 months ago.

You have still not told me in which part of the UK he resides. Devolution has had a significant effect on the position.

Expert:  bigduckontax replied 7 months ago.

Just Answer has gone doolally again and will not let me edit; please ignore my last post

Expert:  bigduckontax replied 7 months ago.

You are correct in your surmise regarding Capital Gains Tax (CGT) on any gain made on the sale of the rented out house. The gains is the difference between the selling price and the acquisition price. The former is net ie after deducting selling costs including advertising. The acquisition cost is the price paid for the house plus purchase costs including Stamp Duty, plus improvements eg installation of double glazing, central heating, extensions etc, but not routine maintenance which can be used to offset rental income. The sale would also attract the Non cumulative Annual Exempt Amount (AEA), currently 11.3K, and, if he occupied the house before or after the letting period, Lettings Relief (LR) up to 40K. These reliefs offset the gain for CGT.

I cannot see how gifting deprives the estate. It does, of course, but so what? It is his estate so he is entitled to dispose of it as he wishes. Whether his daughter is entitled to exercise such powers is a moot point. If he is still compos mentis then his instructions should be sought to be on the safe side. When my mother went initially into a home we sold her house for her at a competitive price. I took the contract to her for signature. Her comment was 'Oh, do I own a house, well I won't need that now I am living here,' which I thought was ample proof of sensibility. In the end, many years later, the capital sum was still intact in her building society accounts at her decease.

I do hope that you have found my reply of assistance.

Customer: replied 7 months ago.
the crux of the matter is if he gifted the house then he would have to pay Capital Gains tax. At present the rent she pays goes towards his care home bills. My sister is likely to get the house once dad passes on as she and I are 50% beneficiaries. Would it not make sense to carry on with the payments and get the house and any monies left @ 50%?
Expert:  bigduckontax replied 7 months ago.

Correct, let sleeping dogs lie.