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We bought my father's council house and intend to sell it to our daughter for the price we paid: what is the likely Capital Gains Tax position?
My husband and I purchased my father in law council property in Dec 04 the deeds remained in his name with a charge against it as he was entitled to the council discount. A declaration of Trust was drawn up and saying that he has a lifetime interest in the property and only us as the buyers can sell it etc. Now the three years have passed so we don't have to pay any discount back to the Council we are now wanting to change the title of deeds to our name. However, we purchased the property for £45,000 and its now worth approx £115,000 for our daughter and husband to get onto the property ladder when the time comes that my father in law passes on. Then when this happens my daughter will then buy the property off us for £45,000 so we can pay off the money that we borrowed on our property. As we have a deed of Trust and a charge on the property can we give our daughter the difference between what we paid for it and what it is worth without paying capital gains in one lump sum or is it advisable to do this on a yearly basis so it is within out CGT allowance. I look forward to hearing from you.
On the basis that the Declaration of Trust has been properly drawn, then there is no CGT to worry about as long as father is living, as there is beneficiary in possession relief. After father's death, there may be a future CGT liability, using the value at his date of death as a base value.
There does not appear to be any tax liability involved in transferring the house from father to you and your husband.
Any transfer to your daughter at less than market value, will be a partial gift (on present figures £ 70,000 ). This will remain aggregatable with parent's estates ( half each ) for 7 years for Inheritance tax purposes. As seen above, there may be little or no CGT on this gift if made shortly after father's death.
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