HELP!!!!! Capital Gains Tax/sale of parents house.(19 Posts)
I have recently sold the family home on behalf of my mum and l which belonged to my mother and father and they added my name to the deeds three years ago.
So it was jointly owned by mum, dad and l (joint ownership, not tenants in common) then dad died in Nov 2012 and mum went in a nursing home (now almost zero mobility , so cant take to bank to open acct etc).
So when it was sold recently it belonged equally to mum and I. I am mums appointee for DWP and was her main carer up to her going into the home. I am not her POA however just unofficially deal with all her and dads affairs for last few years and her pension and private pension are paid into an account which is in my name (she no longer has an acct in her name as cant get out so no point really) and l pay all her care home fees etc etc.
As mum doesn't have a bank acct these days she signed a form agreeing that the proceeds from the sale £139,500 net went into my account.
I then had to pay around £5k in arrears in care home fees as her pensions doesn't cover them and had to payback my DH for dads funeral which he paid for as a unofficial loan really which was around £3,500 and also for the materials and refurb work he did on the property before recent sale which total around £10,000. He also has paid for a few previous care home fees which l need to repay him for - around £1000. I also am about to pay for a headstone etc for dad and later mum obv. which is about £1,000.
So what's the craic with CGT then?
I sold the house as we were getting in arrears with everything with mums outgoings to clear up her debts and all above etc. and to avoid the local authority getting a charging order on the property as they were pushing for that and deferred payments and l would much rather hold the purse strings myself - thank you very much!
Also to invest a big chunk of it to pay mums care home fees and other needs for the rest of her days and eventually her funeral obviously.
But as it's all in my account please tell me they wont count it as all my 'gain'. Surely legally half is hers anyway. If mum lived ten years (unlikely as very old and very infirm but you never know) her half and possibly mine (as they may count it as deliberate disposal of assets when parents put me on the deeds iyswim ) would all go in care home fees anyway.
Also do l deduct all above debts paid off on mums behalf before l work out how much each we have gained or will it just be counted as around £70,000 each 'gain'.
Just another horrible thought - if mums half runs out and the local authority then clawback my half of proceeds under the deliberate disposal ruling and treat her as though she still has it all, meaning l will have to pay her fees etc. then surely if l have been made to pay CGT on my half then l am being hammered twice.
Surely they cant have it both ways ?
I'm not a tax expert, but first do the sums on CGT. Remember that it is gain, not total sale price.
I think your gain applies only since you went on the deeds. Most houses will not gain that much in the last three years. You can knock off your £10k CGT allowance and expenses for the sale. Is anything left after that on your half?
the 'deliberate disposal' is a different issue. It was obviously sensible to sell the house. I think only your mum's half will be used for care home fees but you do need to check and get a proper statement of the position. The LA will not put her out on the streets, but if she runs out of money she may have to change care homes.
Ah yes thank you. l never thought of that tbh about my late appearance on the deeds - this was just done to ensure l inherited their main asset their property btw, aswell as being both their main benefactor in their wills - a sort of belt and braces if you will.
So £125,000 was it's estimated value when my name went on it. The extra value is largely due to refurb done to it by me and my DH, as market values have hardly moved in that period.
Thank you very much for your help and kind wishes.
I don't work btw and haven't in last 3 years as been looking after my elderly parents full time. l have only been getting carers allowance and a small private pension (l am in my fifties) of around £1000 per year.
You would need to check your Dad's will.
If you were added to the deeds in around 2010 on a 1/3 1/3 1/3 basis
it is most likely that your Dad left everything to your Mum so at the sale date she owned 2/3 and you 1/3
It should be possible to get a value on the house as at the date you acquired 1/3 of it
The value is less than the IHT limit, but it depends on what other estate your dad had : whoever did his probate can tell you
Any CGT on your sale of your part is based on the increase in value since you acquired it
with a £10,000 tax free amount - that has no relation to earnings
Social Services rules about estate diminution are another whole set of hoops
sadly I think you may need face to face legal advice .
I think its very unlikely that you will have to pay any capital gains tax - I would ring inland revenue to ask in the first instance. on those figure its was a total gain of around 20k of which your share would be nearly 8 K -which is within the cap gains allowance
with regards to the care home fees that could be an issue - the issue will be when (if) your mum's share of the cash runs out - and you want social services to pay for her fees. Age uk would be a good start and there is an elderly parents section on here which might give you some help as well.
Do NOT under any circumstances get HMRC involved before talking to an expert
HMRC will then have you on their radar
which is to UTTERLY be avoided
Thanks again to everyone taking trouble to reply. I am not quite as worried now but will get some legal advice l think.
To answer some of your comments, Talkinpeace as l understand it the solicitor who acted for us on recent sale and on my name being added three years ago, he explained it as this:
Joint tenancy ownership is a ' last man standing ' basis and is joint and equal to any parties on the deeds at any given time. Also he said it overrides any wills etc. So though dad did leave everything to mum (they had very little financially but the house was mortgage free) - as I was on the deeds by then, when he died mum and l became equal 50/50 owners of the whole house, not just two thirds of it.
But are you saying it is treated or viewed differently for CGT purposes ? you see that's the bit l'm not sure on as when l first acquired a share I owned a third. But then two years later when dad died l suddenly owned a half. So maybe they break it down like that, as how much l owned when etc.
Talkinpeace yes I intend to clarify first before contacting HMRC formally
as i dont trust them as far as I can throw them as they drove a good friends self employed partner to suicide a few years ago but Mydeerheart l may make an anonymous, generic enquiry on a hypothetical basis, as you suggest.
Which leads me to another question Talkinpeace as you mentioned popping up on their radar.
When a house is sold are the IR not automatically informed or does it come to their attention via your bank or something ? or are they dependant on you informing them ?
Finally I am not too worried about the clawback social services thing as for one, this would have happened anyway to the main chunk of the proceeds had my name not been added. At least now I have a chance to invest it and make it work for me and mum somehow so there is a much better chance of something being left, rather than just been sat in L.A. coffers just dwindling month by month and them throwing me a few grand that's left after mum has passed away.
Secondly mum is very old (89) deteriorating constantly now and is unlikely to be around for too many years now or even less sadly.
Also even if she is her deterioration is such that the residential home even with the help of a roomful of NASA type equipment they have for moving her etc etc. will soon get to the point where they cant cope with her needs and she will need nursing care or part nursing part res. so fees wont be as much of an issue or cancelled completely.
House ownership : Cool, looks like whoever added you to the deeds did their job properly. CGT follows ownership. Therefore the maths is pretty straightforward - follow this example
HMRC notification : yes, technically. But the reality is no. BUT you are obliged to tell them if there has been a taxable event - the onus is entirely on you - and they can go back 7 years when they spot something!
With figures like that I don't think you owe any CGT - in the simplest terms the gain for you is half of 14k which is under your annual allowance.
Sounds sadly like your mum will need a nursing home sooner rather than later, and so will have to move anyway. AFAIK everyone is entitled to nursing care, but she will probably have to pay for the residential element until her funds drop below the approved limit (£23k or so). The suggestion of AgeUk is a good one to find out where you both stand financially.
Very helpful link Talkin and l have followed it and it all works out.
Right l have spoken to my house sale solicitor today and a local accountant. Basically they have confirmed what you have told me that they can only go back to the market value of my share of the property at the time it was gifted to me and then set that against what my share brought in the recent sale.
Luckily house prices were approx. 9% more in the area three years ago - according to Zoopla etc so there is only about £20,000 difference in what my third was worth at the time l was put on the deeds and what my half sold for now. So the spike in the house prices around that time has cancelled out a chunk of my increase from a third ownership to a half ownership and saved me from the taxman basically cos if you go back five years homes were worth around the same they are now.
So with a £10,000 allowance (I am not working at mo) for CGT and with the costs of the clearance/renovation etc etc taking care of the rest then l will be ok.
Thank you so much for all your advice
Yes Talkin absolutely - knocks spots off giving it to taxman
If I were you, I would make sure you get very good advice as I think you might find that, if your mums "share" of the house gets used up to pay her care home fees, the Local Authority will look at your share. From what you say, you got put on the deeds to try to avoid half the house value going to the council if needed for fees? I.e. It wasn't your main home and you didn't buy your share of it. My parents considered something similar and the advice they were given was that this is seen in a very poor light and councils will attempt to recover the money. Might be different depending on where you live as different council. But from the councils point of view , if you hadn't been added to the deeds then your mum would be able to use total value of the house towards her fees before dropping below the funding threshold (23k) and needing LA funding.
There is another element of this you have not looked at the tax implications of the fact that your DaD gifted you part of the house and then did survive 7 years. It sounds like his estate was under IH threshold, but you would be better served paying for an hour of really good tax accountant advice to be able to present it correctly to HMRC rather than have to pay for more advice in the event of an investigation.
You may not have any CGT advice equally a tax accountant maybe able to advise you how to spread the gain between you and DH to make it £20,000 before tax rather than £10,000.
we covered that on the 25th - and OP is OK.
Thanks for both your input re the seven year thing. Yes l am aware of the situation with care home fees and seven years etc etc . Dad may not have lived seven years but in the end didn't have any care fees to be assessed for , only palliative care at home right at the end and l have been advised there can be no 'clawback' of dads half of the gift they jointly gave me - only mums part of the 'gift' could be seen as 'deliberate disposal to avoid care fees' whereas dad couldn't because he never incurred any care home fees to avoid.
As l said upthread l am not too bothered about that aspect , l still would much rather hold the purse strings myself, invest the money myself, make it work etc. rather than just sitting in LA coffers till it's down to the last £23,000 or whatever it is.
Either way they may still or may not come after my share but cant chase what l have increased it to in the meantime, nor would l have to pay extortionate admin fees for all the admin of them getting the charging order, deferring payments etc etc.
Also have on good authority as stated above they have no claim whatsoever on my dads part of the gift to me. Basically a husband cannot be held financially responsible for his wifes care home fees years after his death.
They'll probably give it a go though, knowing my LA!!
Another bottle Talkin ?
:-) any excuse.
On the other hand its sad that your maths have to include medical care for your Mum
but thank goodness we live in the UK (unlike the US where I'm from) and medical care is free at point of need.
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