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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5147
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My parents inherited the house they have lived in since about

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My parents inherited the house they have lived in since about 1974. They signed the house over to my sister and me about 20years ago. We jointly own the house. Neither of us have lived permanently in the house since the 1970s. What is our position should we have to sell the house, either to fund care for our parents or when they are no longer with us? Also, what is our position should one of us buy the other out? Thank you.
Hello and welcome to the site. Thank you for your question.

You became a joint owner of the property some 20 years ago. Neither you nor your sister had this property as your main residence since having ownership.

This property would be regarded as a second home for you and your sister for capital gains tax purposes and chargeable to CGT after gains annual exempt allowance.

Whether you sell the property to fund care for your parents of one sells one's share to the other owner the gain would attract CGT.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 4 years ago.
If the property has not been sold since my grandmother bought it over 60 years ago how would the capital gain be calculated? I don't know if my mother paid any inheritance tax when she inherited the property and whether that is taken into account when calculating capital gains tax. Is there a risk that we will have a huge bill because the property will have increased in value so much since my grandmother first bought the house? thank you.
Mairi, thank you for your reply.

Your cost base would be the valuation of the property when it was transferred to you and your sister some 20 years ago.

Having said that, factor for consideration for inheritance tax purposes -

You can continue to live in your home as your primary residence after giving it away, provided you pay a market rent to the new owner. Bear in mind that the new owner may have to pay Income Tax on the rent you pay them.

If you don't pay a market rent, the gift will be considered a 'gift with reservation of benefit' and the house may be subject to Inheritance Tax.

If the above were to apply with reservation of benefit and provided the estate was not above the threshold for IHT purposes, there would be no IHT implication. If the property was deemed part of your parents' estate then CGT would not apply.

I hope this is helpful. and other Tax Specialists are ready to help you