Capital Gains Tax

[KC81]

I have a question regarding CGT on a property that may be classed as a partial gift:

If a property is sold for less than its value, and it's transfer noted in the will from parent to daughters, will HMRC look at the difference between the sold price and actual price as a gift?

If so, when the relatives go to sell the property in the future, will they pay capital gains on the profit made above the actual price of the property, or pay capital gains on the amount between the lower transferred price and the sale price (resulting in a much larger capital gains).

Any information regarding this confusing matter would be much appreciated!

As you've mentioned a will can I ask if the parents have passed away? As this will decide whether it's CGTax or Inheritance tax you need to be concerned with.

If they're alive, HMRC will use the full value of asset to determine the gain made (gifts between direct descendants don't recognise the price discount)

This means when the daughters sell, the CGT due will equal the gain between the full value of the property when gifted to them and the final sale price (minus any costs the sale causes and any improvements made to the property since they've had it)

If the parents have passed and the house was their main residence it would be exempt from any inheritance tax.

Hope this helps!

Hello Goldilocks and thanks for your reply.

Yes their mother who previously owned the house passed away 6 months ago. She remained in the house until this time.

Can you explain this below?

This means when the daughters sell, the CGT due will equal the gain between the full value of the property when gifted to them and the final sale price (minus any costs the sale causes and any improvements made to the property since they've had it)

The property was sold to the daughters for £35K, but valued at around 115K. If they were to sell the property tomorrow for 115K what would the CGT be?

They would have made a profit of £115k - £35k = £80k

Assuming there are 2 sellers, this is a profit of £40k each, less sales costs

Each get a CGT allowance, assuming they haven't already used it, of around £12k - this leaves £28k each they will be taxed on each

This will be taxed at 18% / 28% depending on their levels of income

Thanks Brit,

If each of the daughters then has their own home, would they be able to nominate their mothers property to reduce the CGT owed?

Do you mean nominate as principal residence? No, not unless they've actually lived in it as a main residence during the period of ownership.

One of the daughters has lived in the property during the period of ownership. She was renting her own flat at the time.

It has to have been her only or main residence to qualify. If she kept a rental property at the same time it's unlikely to qualify.

Speak to HNRC for guidance.