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bigduckontax, Accountant
Category: Tax
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Over 15 years ago we bought a flat with my mother, joint

Customer Question

Over 15 years ago we bought a flat with my mother, joint ownership. She is retired and an Argentinian citizen, so her tax domain is not here in the UK, as she does not live here, just comes for holiday periods. We are thinking in selling this property and the Capital Gain implications, as one owner is a UK citizen and the other one not. The government website talks about "non resident" owners, but does not mention on foreign non resident... all so confusing. My other point is if I just pass the flat solely into her name, which is perfectly legal as there is no money exchange in that proceeding, then she can sell it, but again will she be liable to pay Capital Gain as a non resident and foreign owner? The flat was bought on the region of 66.000 pounds and probably is valued today on 300.000 pounds, Gosh shocking. If we loose a lot on taxation when selling probably we shall keep it towards the end when we are all leaving planet earth...The more I read on this subject the more confused I get as the websites are not clear on this issue of "non resident..." Would like to sell but make sure we do the legal thing to save on Capital Gain Taxes. Many thanks for your help.
Submitted: 4 months ago.
Category: Tax
Expert:  bigduckontax replied 4 months ago.

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

It is perhaps slightly easier than you might think. The Government at the time decided that overseas owners of landed property should be brought into the Capital Gains tax (CGT) regime so it was enacted that such persons would be liable to the tax on any gain made from an April 2015 valuation. As far as you are concerned, providing that the property is your sole or main domestic residence, Private Residence Relief (PRR) will apply which relieves CGT at 100%.

Have I resolved your conundrum? I hope so.

Customer: replied 4 months ago.
NOT REALLY. The flat in question is not our main residence. I know about the main residence implications. So now what you are saying is that from 2015 up to whenever we decide to sell the property will be taxable on Capital Gain, so if we sell next year, 3 years of capital gain for my Mother who is not a UK resident? and whats about me I live here and I am a UK citizen?
My thought is that Capital Gain will be charge for every year we own the property and based on the value it was bought 66.000 pounds and the difference between the current value around 300.000, so we will be paying tax on 234.000 pounds? I am not clear on this at all, I am afraid your response did not help us.
Customer: replied 4 months ago.
No phone calls I am deaf, that is why I prefer to use this method.
Customer: replied 4 months ago.
my question based on what you said, would be an advantage to transfer that property solely into my Mothers name, so in that case she will be liable to Capital Gain tax from 2015 and not before? If that is the case it will be more economical to pay 3 years capital gain tax for her only, as I will be liable to pay Capital Gain for the whole period of ownership, which is over 15 years? am I correct?
Expert:  bigduckontax replied 4 months ago.

No, it will be split. Your gain will be subject to normal CGT process and calculated from the original purchase price. Your Mother's gain will be computed from an April 2015 valuation. There is a non cumulative Annual Exempt Amount (AEA), currently 11.3K, to offset these gains. You liability will be at 18% or 28% or a combination of the two rates depending on your income, including the gain, in the tax year of disposal. You share of the gain is 117K so a worst case scenario is a tax bill of say a tad under 30K. For your Mother's liability I cannot quote without a 2015 valuation.

Customer: replied 4 months ago.
I think if I put her name only in the flat as sole owner, then she can sell it and will be a big saving on Capital Gain, based on what you said here. A similar flat in that block sold in 2015 at 256.000 pounds, today they are in the region of 300.000 or maybe slightly less. In that case my Mother as the sole owner non resident will be paying tax on that difference which is 44000 pounds and at 18 per cent, she is a pensioner and not in sterling.... So would you advice to put the flat in her name only as this will save on Capital Gain?
Customer: replied 4 months ago.
or is there any more tax implications....
Expert:  bigduckontax replied 4 months ago.

Well not quite as at the date of gift you will be liable to CGT on the disposal of your share. However, overall there may well be a saving involved. The gift will also create a Potentially Exempt Transfer (PET) in your Inheritance Tax (IHT) affairs. PETs run off at a taper over seven years and in the event of your decease within that period are added back to your estate for IHT purposes. PETs are the first to suffer IHT and if your estate is insufficient to meet the tax on the PET the liability cascades down to the beneficiary for immediate payment. IHT does not kick in until assets exceed 325K and is at 40% flat rate.

Customer: replied 4 months ago.
Oh Gosh she probably will be better off living in that flat for a few years from now, but all so complicated as she only comes here on a tourist visa, we should have sold it some years ago, but money in the bank is no good. People are turning to gold now...I am so tired of all these legalities, particularly when you are just scraping bottom, not a property rich person, uffffffff
Expert:  bigduckontax replied 4 months ago.

If she did, of course, then a proportion of PRR would apply relieving CGT. As you said you should have sold it years ago, but then property generally accumulates value rather faster than money these days. Always bear in mind Benjamin Franklin's dictum that in life there are but two certainties, death and taxes!