Capital gains tax question(14 Posts)
Does anyone know what the CGT situation is for the following:
Granny lives in a flat she's been in for last 60+ years. Flat currently worth ~600K (she bought it for ??2000 a million years ago in a crap part of London, gentrification etc. She's always lived a very working class life and is not wealthy)
Granny wants to move to be closer to family as she's just lost her husband and is 86
Granny can't cope with buying and selling at the same time and only wants to move once.
Family could just about cover the cost upfront of a new house/flat nearby - cost approx 300K as a short term measure (draining family business of cash)
Would she have to pay CGT if we bought her a new house to move into then she sold her house a few months later?
How is the best way to do this? No-one is trying to be dodgy or avoud tax we have to pay, but it does seem unfair that by helping granny avoid the hassle of chains and constant hassling lawyers to get exchange and completion dates aligned we might have to pay a huge penalty.
PLease let me know if there is a better board for this question.
I think you are allowed a few months leeway but I don't know for sure so it would be worth giving hmrc a call to clarity.
Having said that if you did incur a capital gain it would only be from the date she moved out not the date she bought the house so any gain would be minimal and probably within her annual allowance.
No she's entitled to private principal residence relief (no CGT to pay) for all the time she has lived in the house and for 18 months thereafter.
as noted the CGT will only apply in the time between her leaving and it being sold, even in London 28% of that gain is not going to be millions.
However this sounds too risky a manouevre - if it goes wrong your family business is down the toilet. Much better for someone to take over the work of the transaction and do it the normal way. You can have a gap of two weeks or more between exchange and completion to give time to sort things. You can get provisional removal quotes before exchange. She has to sell so she has to accept viewers. She has to buy so she has to choose a new property. It doesn't have to be that painful if someone else does all the chasing and correspondence.
BTW no need to make excuses for her wealth. Only the playground jealous will worry, and they are too foolish to bother with.
oh yes - private residence relief too. No problem.
sell and buy in one go. You don't want the place empty and you don't want the hassle of a tenancy which will be at least six months.
If Granny cannot cope wit the hassle of buying and selling ,why not step up and do transaction for her?
Thanks for the info - I didn't realise the CGT was on the gain between buying the new property and selling the old one, plus the 18 months leeway - really good to know.
I can't do it myself as both partner and I both work 4 days PW and we're in the middle of buying and selling our own flat, a process which has been going on since March and has had lots and lots of hassle and still isn't resolved. Latest update is we still don't have a new place to buy since we had to pull out of our original choice due to survey nughtmare and the 2 places we're offering on are dicking us around with move dates (search my other threads)
We are making the same move closer to family ourselves which makes everything hard including viewing houses, plus we're TTC and we have a toddler to look after in our few spare minutes. But thanks for the "helpful" suggestion.
As a family we're very sure we're happy to buy the new place and move granny in, then sell her London flat afterwards. I just wanted to check the tax status. Thanks for the useful info which has put my mind at ease!
I'll be doing all the selling work myself and thankfully family in the new area can do the buying work so it'll be nicely shared round
well, we didn't have all the info. My 'helpful' suggestion was not to risk your entire finances because granny can't cope. Even more reason not to do so given the drip feed.
cheaper to pay someone to do it.
best of luck.
I think specialsubject was just concerned that you buy Granny a flat with your business's money, she moves in = lovely.
BUT then, you have Grannys flat to sell. What if it isnt worth £600k you estimated, or it takes forever to sell, or some sales fall through etc..... it could take so much longer than you planned, thus risking your business's money.
(Id also take some inheritance tax advice re the £300k Granny will be 'making') Better given away now than left in her name to pay any nursing home fees and then taxes.
Specialist I wasn't meaning to have a go at you- you gave me lots of genuinely useful info. Sorry it came across the wrong way.
My crappy dig was at pp who had no advice except I should 'step up'. Though I acknowledge I was a bit passive aggressive in my reply and taking out a lot of stress about my current situation on a stranger who had bothered to comment on my post so apologies for that too.
very stressful for you, no worries. I have to say that if granny is competent (and you give no indication that she isn't) then she is the one who has to 'step up' and recognise that it is one move in one go, and it is hassle. She should not expect you to take the small (I hope) but very real risk of losing your livelihood, e.g. in the scenario that Sunnyshores mentions.
if by any chance she isn't fully competent that someone else takes over anyway.
Re. your post above, from my understanding (which admittedly may be wrong) if you weren't able to sell the flat in the 18-month window after your granny moves out, she would only pay capital gains on the gain in value from the point she moved out and it ceased being her main home. (i.e. it's nothing to do with the value of the property she moves into).
E.g. granny moves out of flat on Dec 2015 and another property (that you've bought her) becomes her main home. Flat is worth 600k at that point. Flat is sold March 2018 for 660k. She'd pay capital gains on 60k (minus her capital gains allowance, etc).
However, chances are you'd sell it within the 18 month window unless there's something major wrong with it (e.g. subsidence).
Sorry - realise my point had already been clarified by someone else above. Don't mind me, I'll get me coat...
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