Should we gift DD a (small) house?

[stayathomegardener]

I'm not sure if I've thought this through properly.
We have a rental property that we purchased and rebuilt after it pretty much fell down 27 years ago.
If we sold it capital gains would be huge so I'm wondering if we should gift it to DD.
I understand if we did this we couldn't profit from the rent as it wouldn't be a gift.
Anything else I should think about?

I missed the part about your daughter having health needs and unable to work - a discretionary trust may well be the right thing in that event.

The trustees could consider giving your DD a revocable interest in possession so the income will be taxed as hers, instead of at discretionary trust rates and having to do a reclaim.

Rent it out has a holiday let for a year and then use gift relief.

There are options to do a holiday let, it would be in demand. However I feel I would need to wait four years until the current tenants daughter leaves for uni, it's on a six month rolling tenancy but she has been there five years and I knew her plans initially.

DD has CFS so there is hope she could recover but it is a very fluctuating illness so hard to plan for.
If she is very unwell she could live in the barn adjoined to us and be supported, if we both died and DD was well I know she would love to stay on the farm but would need to raise inheritance tax money to do so which small house could provide.
I know farms shouldn't incur inheritance tax but it's more an expensive hobby than a working farm so assume she would have to pay.
We are asset rich and cash poor.

SIPP is good for future and we can sell of parcels of land to find things so not unduly worried about gifting house.

I now understand why other don't do this, it's more complicated than I thought. So much to consider.

OP your husband might be impressed by the info, but I can tell you for nothing a lot of is misleading (at best) and down right wrong (at worst).

If you add her name to the legal deed without severing then she will inherit both of your 'shares' tax free if you are planning on avoiding IHT this way eh? Really? Er no. Utter rubbish.

move in for 3 years and that stops CGT er no. It doesn't work like that.

cant you just sell it to her for a tiny fee er, no. It's not as simple as that. Don't you think HMRC might be on to this?

Get some qualified advice.

You need to be very clear on what you are trying to achieve by making the gift.

Salami slicing will eventually get the property to your daughter with the higher base cost for CGT (thereby getting rid of the gains).

Passing the property to a trust will also get the property out of your estate for IHT but the gains will still be untaxed and the base cost for the trust will be the same as your original £80k. Same if your daughter gets the property via the trust. If your daughter then wants to sell the CGT problem remains, but it would be fine if she just needs an income stream.

One further consideration is your daughter's SDLT position if she eventually owns this property (rental) and then wants to buy her own main residence. Under current rules the 3% surcharge would apply to that purchase.

You really need to consider this in the context of your overall assets, and as part of your lifetime plans for both you and your DD.

If your dd owns a property that she doesn't live in ( or a share of it worth over £16000) it will mean she's ineligible for any means-tested benefits, including income-based ESA and housing benefit/council tax reduction. Worth thinking about if she may be unable to work for health reasons. The change from tax credits to universal credit will mean she wouldn't even be able to claim top-up benefits if she is able to work part-time. On the other hand, she may be able to top-up her own income from rental income instead.