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Buachaill, Barrister
Category: Law
Satisfied Customers: 10977
Experience:  Barrister 17 years experience
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I own a property say worth £400,00 and wish to 'gift' 20% of

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I own a property say worth £400,00 and wish to 'gift' 20% of the property to a child. The property has no mortgage and it is tenanted. The value of the property when acquired was say £300,000. I am aware that the 'gift' is subject to the 'taper relief' inheritance tax. However the 20% share of the property has gone up by £20,0000. Does this transaction count as a capital gain? Hence would I need to pay tax on £20,000-£11,100(this years capital gains allowance) hence on £8,900 ?
1. When a gift is transferred to a person such as a child, it is the value at the date when the gift is made that is the important value. Here, even though you bought a property at £300,000, it is now worth £400,000 and if you gift 20% of that to a child, then the value of the gift in the child's hands is £80,000. It is this £80,000 value which will accrue in the child's hands. However, you do not automatically accrue a capital gain just because you disposed of 20% of a property. In theory this capital gain is £20,000. There are certain allowable reliefs, such as payments on interest on any loan, stamping fees, capital improvements, repairs to the house, any work done by workmen to the full property. So even if you might in theory have a liability to tax on the sum of £8,900, after your annual allowance, I would be surprised if you didn't have allowable reliefs on the property. Remember even though you disposed of part of the property, you still get allowable reliefs for the full property to offset against this taxable figure. Not merely 20% of these allowable reliefs.
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