I am considering selling a property that my parents gave me in 1984. They both continued to live there until my mother died in 2014.
I lived there for around eight years after it was gifted to me, and then moved to my marital property while caring for my mother who remained in the house.
Since her death, I have been renting out the property for a couple of years and receiving the income. However, I am finding the work involved rather onerous and am considering whether to put the house on the market. If I sold it, would I be subject to inheritance tax or capital gains tax?
The value of my mother’s estate was less than £300,000. I was not involved in the administration, but should the property have been taken into account? If it is capital gains tax that potentially applies, how do I work out the estimated cost at time of transfer? Estate agents, solicitors and HMRC have all come up blank on this.
Query 18,956 – Stressed.
Reply by Terry ‘Lacuna’ Jordan, BKL
The key point is that the gift was before 18 March 1986 when inheritance tax was introduced with the revival of the old estate duty concept of a gift with reservation of benefit (GWB). In my experience, some confusion was caused by renaming the legislation as the Inheritance Tax Act 1984.
The gift was made during the capital transfer tax (CTT) era and, with its original lifetime cumulation of gifts later moving to a period of ten years, there was no need for the GROB rules. On that basis, the value of the property did not form part of the parents’ estates for inheritance tax purposes on their deaths.
Stressed acquired the property in 1984 and will potentially be liable to capital gains tax on a sale of the property now – I have assumed that the parents were not ‘dependent relatives’ on 5 April 1988. It was apparently Stressed’s only or main residence for eight years after the gift, so the gain attributable to that period and the last 18-month period of ownership will be exempt from capital gains tax. Further, Stressed will benefit from a measure of ‘lettings’ relief with a cap of £40,000.
I am surprised nobody could provide even an estimated value as at 1984 since chartered surveyors and the District Valuer should be familiar with 31 March 1982 values.