Tenants In Common, Capital Gains Tax - CGT - tax advice from independent financial adviser (IFA) Isis Financial Planners
Isis Financial Planners' Maggie Fleming answers reader's questions in Saturday's Daily Telegraph newspaper for the Property Clinic section.
There is a wealth of information on all aspects of property and tax from Capital Gains Tax and Inheritance Tax to other technical and challenging issues of this complex subject. This page shows the articles for June 2009. To browse the articles from a previous year, please visit the main Property and Tax page of this website.
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- Lifetime Gifts & Capital Gains Tax (CGT) - 29 June2009
My wife and I have bought houses for our two children as "lifetime gifts": the first was two years ago and they own it as tenants in common, but our student son actually lives there. Now we have done the same for our daughter, also a student, and we need to decide whether they should own this house as tenants in common too. Our wish is to ensure that each gets the same benefit and to deter gold-diggers. But I'm worried that they may be both liable to pay CGT when they come to sell.
Maggie Fleming writes:
If they own both properties jointly but live separately, each will have CGT to pay when they sell their share of the property in which they do not live.
So, from a tax point of view, it would be better if each were to own their own home rather than a half-share of both.
The least-complicated way of doing this would be for the new house to be gifted in its entirety to your daughter and for her to gift her share of the first house to your son. She has not lived there so her gift could crystallise a capital gain if it has appreciated in value over the past two years, but not if that gain is less than the current annual exemption of £10,100 or if it has lost value.
However, if you decide that you would like the new property also to be owned jointly by your children, all is not lost. There is a little-known extra statutory concession (ESC/D26) whereby people jointly owning two properties, each of which is the only or main residence of one of them, can exchange their interests without either of them incurring a CGT liability.
As for gold-diggers, you may wish to speak to a solicitor about alternative deterrents.
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