We have a proprty which we would like to give to our son who hasn't any other assets.
If he should sell the property within seven years of our giving it to him, would any of us be liable for tax. Is there a time limit? I know we would pay gift tax if either myself or my husband were to pass away within the seven years. But once the gift is made, is he free to do with it whatever he wishes?
2007-06-27 01:59:33 · 6 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United Kingdom
If the property is your son's only or main residence throughout the period he owns it, there will be no CGT to pay. Similarly, if it has been your only or main residence, then you will have no CGT to pay. However, if it is not your only or main residence, then you would potentially have to pay CGT on the difference between the value of the house at the date of transfer and its purchase price (taking into account purchase/sale costs). As the house is being given away to a family member, its not an 'arms length' transaction and so liable to CGT. However, you can elect to defer the CGT until your son sells the house - however long in the future that might be. So, in effect, you are giving hima CGT liability for the future for the period when you owned the house.
The IHT will be payable by your estate when you die, not you!
2007-06-27 09:54:06 · answer #1 · answered by fengirl2 7 · 0⤊ 0⤋
By gift tax you mean Inheritance Tax which is payable on the value of your estate upon your death.
You are right that this is still considered as part of your estate should you die within seven years of the date of the gift.
Once the gift is made your son would be free to do whatever he likes with the property. If you retain any control over it then you risk the transaction being a "Gift with Reservation" which would mean it would not fall out of your estate even after seven years.
The more immediate problem referred to already is that this gift would be a disposal for capital gains tax purposes. As your son is a connected person this would be deemed to have taken place at market value. So even though you have not received any money you may have a tax liability. Your son would be deemed to have acquired the property at that market value for the purposes of any capital gains calculation when he sells it.
2007-06-27 18:21:46 · answer #2 · answered by tringyokel 6 · 0⤊ 0⤋
Capital gains tax, unless the property is his primary residence. I believe there's also special rules regarding the sale of gifted property to stop people avoiding gift tax. If you search the inland revenue website there will be information available somewhere.
2007-06-27 09:07:22 · answer #3 · answered by Anonymous · 0⤊ 0⤋
As you get your first 30 minutes free advice from solicitors I would call a few of them up and ask the question, also you could get leaflets on it from your local tax office, an independant financial advisor or accountant may also give you some guidance.
2007-06-27 09:15:03 · answer #4 · answered by stukaville 2 · 0⤊ 0⤋
Once it's his he can do what he likes with it. If he sells it at a profit he'll pay CGT.
You may have a CGT libility on the gift.
Your IHT liability exists on the gift at today's value. What happens after the gift doesn't affect you, only the donee.
2007-06-27 15:54:49 · answer #5 · answered by Do not trust low score answerers 7 · 1⤊ 1⤋
go to moneysavingexpert.com
there is a good article there on this.
2007-06-27 09:04:05 · answer #6 · answered by Abdul 5 · 0⤊ 0⤋