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CGT & gift to children

Question: A wife wholly owns a property, an investment property, let with a tenant and not "owner occupied".

She plans to sell it in a few years time and has realised that when she does so she will take the full hit on CGT. So she is planning to:

  1. Either, give a share to her spouse. No immediate problems between spouses for CGT, (I think) and the benefit of two £8k+ CGT exemptions when the time for selling comes,

  1. Or, Give equal shares of the property to her 4 adult children and her spouse. Then, the house will have, in total, 6 equal owners and when sold any taxable gain will have six £8k+ CGT exemptions.

So; What are the CGT shorter term implications/down sides:

  1. Will the gift to the children generate a "disposal" that attracts CGT straight away?
  2. Will it be necessary to establish a market value at the time of the gift so as to work out any tax liability?
  3. What will it be, given that it will be a gift to each of them? Assume the house is valued at £300K today and was bought for £180k a few years ago (plse ignore taper relief etc).

When the property is sold in a few year's time, how will CGT be computed for the various parties?

Thanks in advance for responses T

Reply to
Timbrook99
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----- Original Message ----- From: "Timbrook99" Newsgroups: uk.finance Sent: Friday, November 12, 2004 10:47 PM Subject: CGT & gift to children

Yes. But the CGT payable could be NIL depending on the amount of gain.

Yes.

If the gain is deemed to be 120k, then this will apportioned among the owners according to their respective shares. Each owner will have his/her CGT liability calculated according to their own tax rate(s).

Also, the transfer of ownership could mean a transfer of the rental income also, if the children are over 18.

Doug Ramage

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Reply to
Doug Ramage

To clarify further, if the £120k gain occurred during the present sole ownership, then of course if she were to keep half and give half away, she would only be taxed on £60k of gain. To make best use of annual exemptions, it would be a good idea to make the gifts in chunks, and in different tax years.

Doug forgot to answer this bit. I think the question was meant to refer to the donees' CGT liability. When each of them eventually sells their share, their gain will be calculated by deducting the value of the share when it was gifted from the value when it is sold. E.g. if the house is worth £300k when gifted, and 10% is gifted to relative X, this makes the donor liable for whatavere tax is due on a £12k gain. When (sorry, if) the house is sold a few years later for £330k, obviously X's share will be worth £33k and X will be taxed on a gain of only £3k.

Reply to
Ronald Raygun

I thought I had answered the donees' CGT liability part. :)

Reply to
Doug Ramage

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