CGT split

[csearle]

Hi team,

Background:
Divorce. My ex wife gets 40% of a small property; I get the 60%. The property is not sold because a Court order dictates that my mother can use it until she no longer needs it. Sadly my ex wife kills herself. My three children each inherit a third of the 40%. My mother now no longer needs the property and it will (hopefully) be sold.

Bought 2001
Divorce 2009
Kids's inheritance 2014
Sold 2020 (maybe)

My question is regarding CGT. Is the kid's CGT liability based on the value increase between 2014 and 2020? More generally what are each of our liability's regarding capital gain?

Thanks, in hope,
Chris

[PinkDalek]

Is the kid's CGT liability based on the value increase between 2014 and 2020?

Assuming the property was never their Main Residence for the moment, their original cost for CGT purposes would,I believe, be based on the open market value of their respective shares at the date of their Mother's death. If the death was in 2014, then yes but all 3 should be entitled to the normal annual exempt amount (currently) £12,000 to deduct from their chargeable gain, subject to any other gains in the tax year concerned etc.

If their interests are held in some type of Trust then the situation may be more complicated. Out of my field here I think.

Do bear in mind the valuation should not be a flat 1/3rd each of the 40% of the whole, as there would be a discount applied to ascertain their respective positions. I can link to the appropriate part of the HMRC manual on that aspect if you need it but not tonight.

More generally what are each of our liability's regarding capital gain?

The remaining parts of your question are on the complicated side and need some thought. You may wish to seek professional advice but have a study of this for the time-being. It may not answer your questions but you may be able to come up with further questions:

HS283 Private Residence Relief (2017)
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2017--2

Do note that was last Updated 6 April 2019 and does not take into account certain changes come 6 April 2020. Including, I believe, CGT Returns on additional Residential properties to be submitted much earlier than before and any CGT payments may have to be made earlier as well.

More detail tomorrow, time permitting, but others will hopefully contribute. This being a very draft reply, as it were, but I felt it right you should have something as we've discussed the situation in the past, I think. On that, did you post previously on the subject and, if so, can you find it and link to it?

Totally E&OE and good luck with the sale in the present climate.

[doug2500]

FWIW I really think this is a job for a professional. Sometimes you just have to bite the bullet and stump up the cash to ensure things are dealt with properly.

[PinkDalek]

In haste as previously but briefly returning to this.

More generally what are each of our liability's regarding capital gain?

1. I may have thrown in a red herring concerning HS283 Private Residence Relief (2017) but, in so far as your 60% is concerned, I trust I'm not wrong in suggesting your calculations should be based on a 60% of total acquisition costs in 2001 and (anticipated) net disposal proceeds either this current or the next tax year.

We can't go further than that without the numbers concerning the property and details of your personal income etc in the tax year of disposal but have a look here (in particular the sections headed If you pay higher rate Income Tax and
If you’re a higher or additional rate taxpayer) to get some feeling for what you should be calculating.

It is possible your personal gain will result in CGT being charged at a mix of 20% and 28% (play with the calculator below to see what I mean).

Capital Gains Tax rates
https://www.gov.uk/capital-gains-tax/rates

There's a brief section on Market Value there.

There's also an HMRC calculator here https://www.gov.uk/tax-sell-property/work-out-your-gain but 2020-21 isn't supported by this calculator, if applicable, as yet. You should get to Download your Capital Gains Tax calculation ...

2. With regards to the CGT changes I mentioned effective 6 April 2020, see here for an overview:

Get ready for changes to Capital Gains Tax payment for UK property sales
https://www.gov.uk/government/news/get-ready-for-changes-to-capital-gains-tax-payment-for-uk-property-sales

Noting But you won’t have to make a report and make a payment when:

a legally binding contract for the sale was made before 6 April 2020 ...

You may also need to keep an eye on the Budget set for 11 March 2020 in case there are further changes there.

3. I haven't looked at https://www.gov.uk/government/publications/husband-and-wife-civil-partners-divorce-dissolution-and-separation-hs281-self-assessment-helpsheet/hs281-spouses-civil-partners-divorce-dissolution-and-separation-2016 but it might be worthy of a read to ensure I've made no incorrect assumptions, for when the 40% went to your wife (and later to your issue on her decease).

E&OE

[csearle]

Thank you for your help guys. I'll pass this on to my eldest (who triggered my question) and seek professional advice.

Regards,
Chris

[paulnumbers]

Thank you for your help guys. I'll pass this on to my eldest (who triggered my question) and seek professional advice.

Regards,
Chris

Hi Chris,

Can I suggest you post it here?

https://www.reddit.com/r/ukpersonalfinance

There’s one particular person I have in mind that will answer your question who is very knowledgeable on these matters.

Sorry to hear your story.

[csearle]

[Can I suggest you post it here?

https://www.reddit.com/r/ukpersonalfinance

There’s one particular person I have in mind that will answer your question who is very knowledgeable on these matters.

Sorry to hear your story.

Thank you and thank you. Chris