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bigduckontax, Accountant
Category: Tax
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I have been renting my house out to my niece as I moved out

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I have been renting my house out to my niece as I moved out I now want to sell it to her and split the proceeds between my niece , myself and 2 other family members am I liable for tax, the selling price was 120k I divided it up 30k each
Hello, I am Keith, one of the experts o Just Answer, and pleased to be able to help you with your question. You will be liable for Capital Gains Tax (CGT) on a proportion of the gain made on the sale for the period of the rental less the last 18 months when you are deemed to be in occupation even if this is not the case. You take the rental period in months less 18 and the full ownership period also in months. The rental period less 18 over the total is the proportion liable to CGT. From this figure deduct your Annual Exempt Amount (AEA) of 11.1K and Lettings Relief (LR) up to 40K depending on the rent received. The remaining gain is taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale. The gain is the net selling price after deducting the acquisition price. The latter is the purchase price plus purchase costs including Stamp Duty plus any improvements eg installation of double glazing, central heating, extensions, but not routine maintenance which can be set against rentals for the appropriate period. We now move on to the gifts of 30K each. These create Potentially Exempt Transfers (PETs) [except for your 30K share of course] in your Inheritance Tax (IHT) affairs. PETs run off at a taper over seven years and in the event of your decease within this time frame will be added back to your estate to asses your IHT liability which is at a 40% flat rate over 325K. PETs are the first to suffer IHT and if your estate is insufficient to meet the IHT on the PET it cascades down to the beneficiary for immediate payment. If any of these gifts are to your children this is pertinent as new rules are coming in, please advise if this is the case. I do hope that I have been able to shed some light on your taxation position for you.
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Customer: replied 2 years ago.
The property was in trust with myself, my sister and my niece as trustees , my niece paid rent to me, will this affect the Cgt
Customer: replied 2 years ago.
Please see query above
Firstly, apologies for the delay, I am answering you from a time zone seven hours ahead of GMT so I was in bed.
If this is a bare trust there is no change in my answer. Please advise if to the contrary.
Thank you for your support.
Customer: replied 2 years ago.
What does a bare trust mean
Here is the definition of a bare trust from Practical Law:
'A simple trust, where the beneficiary (or beneficiaries) has an immediate and absolute right to both the capital and income of the trust. The property is held in the name of the trustee (or trustees), but the trustee has no discretion over the assets held in trust. The trustee of a bare trust is a mere nominee, in whose name the property is held. Except in the case of bare trusts for minors, the trustee has no active duties to perform. The trustee must simply follow the (lawful) instructions of the beneficiary in relation to the assets held in trust. A bare trust can be express or implied.'