Advice please=tax implications of owning two houses?

Some may already have seen my previous posting re a recent death a probate etc. I have the inland rev pdf book on CGT but havent waded through it yet as its about 100 pages. Briefly my partner (common law!) owns one house but has or will inherit another. I know there are tax implications here,can anyone describe briefly and/or suggest ways to minimise/legally avoid??

thanks a lot..

joe

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Reply to
tarquinlinbin
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Simply put:

The tax implication is that when you sell a house which you have never lived in while it was in your ownership, then you must pay CGT when you sell it. The simplest way to avoid this is would be to sell it more or less as soon as you inherit it, because then it will not have had time to accumulate any gain. The other way to avoid this, especially if you don't want to sell it because you like it, is to sell your existing house and move into the new one.

That apart, what would you do with it? Rent it out? Then there are income tax implications (on the rent received) in addition to CGT implications when (and if) you do eventually sell.

Reply to
Ronald Raygun

Thanks for the reply,,a couple of questions come to mind,,

a) how would the IR know how many homes you own/how would they know you had sold for eg an inherited property some years after inheriting it ?. Do they compensate you if you keep a house for a few years then sell it at a loss,say when the market is at a low??

How is ownership of a house defined? Is it the person whos name is on the deeds?,do people leave dead peoples names on the deeds?

How would the IR know how much such a house was worth when you inherited it?

thanks for any further thoughts,,

joe

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Reply to
tarquinlinbin

From the Land Registry

Not really relevant

You can carry the loss forward and set it off against future capital gains.

That is often a clue

Never heard of it happening

The amount it was valued at for Inheritance Tax purposes

Reply to
Jonathan Bryce

How can the inland revenue know how many homes you own from the Land Registry. What about homes that arent registered? How can the IR get the info? Dopes the Land Registry have a 'search by owner' facility?

Reply to
john boyle

Could CGT be avoided if say person A inherited a house from a deceased relative,they quickly sold it to a close personal friend person B. Person B paid the money to A. B then put the house on the market again and A bought it back again?, Assuming that A and B are not married and are not blood relatives...

joe

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Reply to
tarquinlinbin

On inheriting someone you are deemed to acquire it at its value as at the deceased's date of death ... the probate value. So no advantage A selling to B and then buying it back again.

Reply to
John

Let's just say most people would be amazed at the Inland Revenue's ability to mine information. And whilst Customs & Excise and the Revenue do already share information, it is considered that the way this will work will only "improve" on the forthcoming merger of C&E and IR. Cross-referencing VAT returns to accounts filed with the Revenue, for example.

Land transactions? SDLT is under the control of the Revenue and so are the personal income tax/CGT affairs of individual taxpayers. Those departments of the Revenue do communicate! Quite legally.

I left the Revenue over 30 years ago but even that far back. I recollect a random issue of a well-known weekly publication being used and everyone advertising a holiday caravan or other holiday accommodation in that issue got a letter from the Revenue asking where they filed their tax returns! Now, with more computing power, it is no doubt much more sophisticated.

Reply to
John

"John" wrote

... unless A sells to B for probate value (no CGT here) then buys from B at substantially higher than that amount - such that when A finally comes to sell, there again isn;t any CGT due to lack of sufficient increase in value.

Of course, B would have to pay CGT on selling (back to A) at the higher price - so overall (A & B combined) CGT will still not be avoided!

Reply to
Tim

"John" wrote

Is a taxpayer required to answer such a letter from the Revenue - assuming of course that they *have* filed their returns correctly?

Reply to
Tim

Yes.

Reply to
Jonathan Bryce

In message , John writes

So from that I can see you agree that the IR cant find out how many homes you own from the Land Registry.

Reply to
john boyle

In message , tarquinlinbin writes

Eh? At what price would each transaction take place?

Reply to
john boyle

but surely if they inherit it and sell it within a few weeks (no cgt) then buy it back,they have discharged any potential CGT becuase they have bought it on the open market at that stage and therefore it is a normal house purchase and not an inheritance? Change the 900 to 670 in the return email address to reply

Reply to
tarquinlinbin

What potential CGT? It makes no difference whether acquisition was by purchase or by inheritance. Inheritance is a disposal by the deceased, and while normally CGT is payable by the disposer (not by the acquirer) CGT is not levied on disposals by way of death. IHT applies *instead* of CGT.

Reply to
Ronald Raygun

"Jonathan Bryce" wrote

Why don't the Revenue already have details of where they received the returns?

Reply to
Tim

I did say that was over 30 years ago! At that time, as now, the self-employed were dealt with in their local tax office and the employed in the office handling their employer. No computers! Far easier to ask the person where they file their returns rather than search the manual records in hundreds of tax offices.

Reply to
John

With computerisation of Land Registry records and indeed electronic conveyancing coming in in the future, I think the best answer I can give is .... I think your assumption is liable to be unsafe .... that is, you should not assume that to be the case.

Reply to
John

or, move in to the new one (so no CGT when yo usell) but keep the old one for up to three years. As the old one has been your home you are execmpt from CGT on it for three years after you move out.

E+OE

Robert

Reply to
Robert

In message , John writes

OK, lets put it another way. I KNOW the land registry cant do it.

Reply to
john boyle

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