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bigduckontax, Accountant
Category: Tax
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My three siblings and I own quarter shares in a property gifted

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My three siblings and I own quarter shares in a property gifted to us by my late uncle. If two of my siblings wish to transfer their share of the property to the remaining two, so that the property is in just two names not four but the property is not being sold, are there any capital gains tax implications?
Hello, I'm Keith and happy to help you with your question.
Yes, there are. Capital Gains Tax (CGT) is a thoroughly nasty tax which tends to rear its head unexpectedly as it will do in this case. One does not have to sell to incur CGT, a disposal will do just as well. What is being proposed is a disposal.
The two who transfer will be liable to CGT on 25% [as each own a quarter] of the gain made between the probate value and the current market value at the time of the transfer. Each will have an Annual Exempt Amount of 11.1K to offset this gain. The balance will be taxed at 18% or 28% or a combination of the two rates depending on the individual incomes including the gain in the year of transfer.
I am so sorry to have to rain on your parade.
Customer: replied 3 years ago.

Thank you Keith. The two who are making the transfer (i.e. giving up their quarter) are both ex-pats (long term) living in the US. The two receiving the two quarters are both UK residents. Does this change the situation?

Indeed it does; As ex pats they will only be liable for CGT on their share of the gain between net disposal price and a valuation as at 6 April 2015.
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Customer: replied 3 years ago.

Thanks, ***** ***** certainly rate you when done - very helpful so far.

Further question though as I don't understand your second answer. What is the net disposal price (i.e. when/what valuation) - the transfer hasn't yet happened. COuld you clarify this answer please,


The net disposal price will be the selling price less the selling costs eg advertising, estate agents and solicitors' fees etc. If the sale takes place in the 15/16 tax year the gain will form part of the self assessment return after 5 April 2016 and will not be payable, if any is due, until 31 January 2017.
Customer: replied 3 years ago.

I'm confused though because we're not selling it. My sister and I (in the UK) will be retaining the property. Just receiving the two quarters share of it so that we then own 50% each. Sorry, hopefully this will be my last question.

The transfer by your two ex pat siblings counts, as far as they are concerned, as a disposal for CGT purposes. That is how CGT works. I accept that there is no actual sale so the calculation of the CGT payable will be based on the current market value as at transfer date and the value as at 6 April 2015.
You and your sister incur no liability in this matter.
Customer: replied 3 years ago.

So if its worth £450,000 say on the date of transfer of say June 1st 2015, and it was worth £440,000 on April 6th 2015, they would be liable for CGT on £10,000? Which would be NIL?

Is the tax situation so beneficial because the gain is only calculated within one tax year?

Not quite; they would be liable for a quarter of the gain each, GBP 2.5k. As each of you have an Annual Exempt Amount of 11.1K no tax will be due from your ex pat siblings in this case.
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