Q. I have a property in the UK that I own 50% of as the co-owner and my father owns the other 50% and he now wants to pass his 50% equity share in the asset to me, this is his only property by the way. First of all, is this possible and if so will either of us be liable to pay the dreaded Inheritance Tax, Capital Gains tax or Stamp Duty?
A. The gifting or distributing of assets can be a minefield and you are definitely right to check out the implications prior to proceeding as it can be a complicated process. Let’s first look at the Stamp Duty issue, I am happy to disclose that none will be payable as long as your Father is definitely gifting the 50% to you, and assuming you are not paying him any money for his share. Moving on to Inheritance tax (IHT)- the gift will be treated as a PET (potentially exempt transfer), meaning that if your Father dies within seven years of making the gift, the full value of it, or a percentage of it, will be classed as forming part of his Estate for IHT purposes. For example, if your Father were to die within three years of the gift being passed to you, 100% of the market value of his 50% share will form part of his Estate, if its more than three and up to four years 80% would count, more than four and up to five years 60% and so forth on a sliding scale downwards. After the period of seven years lapses then you are free from paying any inheritance tax at all, it does depend on the value of the gift though, do check the figures with a trusted property Lawyer. Finally let’s look at Capital gains tax- on the basis that this was your Father’s only property no Capital Gains Tax is payable, but as and when you sell, you may have CGT to pay if you are not going to reside in it. For CGT purposes, you are treated as acquiring your Father’s 50% share at its current market value. When you do decide to sell I would strongly advise that you speak to a professional in this area – the advice of an Accountant perhaps as they will be able to steer you in the right direction and provide you with good solid advise on the way forward. Sadly, organising and understanding property changing hands when there is no money being exchanged isn’t a simple process and can be rather complex given all the government rules and regulations surrounding this but process. However, ensuring you have the right legal advice from the right people will protect you from any possible pitfalls.