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Hello, I am one of the experts on Just Answer and pleased to be able to help you with your question. There are two dimensions to this problem.
There is a danger here of this transaction being classed as a gift with reservation and the 7 years not start to run until your use of the property ceases. It would be much safer for the pair of you to make the gift then pay a commercial rate for your holiday occupations.
Also, the gift will count as a disposal for Capital Gains Tax (CGT) purposes and you will be taxed on the gain made from the acquisition cost and a disposal at current market value less disposal costs.
I am so sorry to have to face you with this unexpected levy. CGT is a thoroughly nasty little tax liable to rear its head unexpectedly and bite.
That is what I would advise to avoid any suggestion of making a gift with reservation.
I did warn you that CGT was a nasty little tax. I know of one case where a man bought a house for his son to live in whilst attending Uni. In the end the son remained in occupation of what was his father's house for many years after. When Dad came to sell the CGT bill was 38K for a dwelling he never occupied or enjoyed.
You have an interest in landed property and you sold it, this attracts CGT, end or story, sorry.
The gift of the property creates a Potentially Exempt Transfer (PET) in the donor's Inheritance Tax (IHT) affairs. The PET runs off at a taper over 7 years. It will also trigger a CGT liability for the donor as it constitutes a disposal.
You would be liable to CGT on gift because you have disposed of the property, simple as that.
First paragraph, yes.
Second paragraph, No.
Thank you for your support.