Gift of property

WC writes: 24 years ago my son decided to start his own photography business. I arranged for the purchase of shop premises through my own bank. The total cost of the property was £16,000. This is now valued at between £80,000 and £90,000. I am now 81 years old and the deeds for the shop property are still in the joint names of myself and my son.

In the event of my death I understand that my estate would be have a potential Capital Gains tax liability on the shop property. Can you advise me if it is possible to gift to my son all or any part of my interest in the property?

Answer

Answer: It is of course possible for you to gift to your son your share of the shop property writes Chris Lane, a partner in Kingston Smith. This is fairly straightforward to do, but it would trigger a potential Capital Gains Tax (CGT) liability as a CGT holdover election would not be available to you. ‘Holdover elections’ effectively pass the asset to your son at your original cost, but are only available on business assets. Taper relief would be available on the deemed disposal of the property, but other information is required to calculate the precise amount.

The gift would also be a potentially exempt transfer for Inheritance Tax purposes and if you survive 7 years would be totally exempt. If you died within 7 years the transfer would be included in your estate on a discounted basis.
You are mistaken in your concern over a CGT liability arising on your death or have been ill advised. CGT will not be charged on the property of any of your assets on your death. Although of course Inheritance Tax will be due on your estate if it is above the current Nil rate limit of £275,000.

Death is the ultimate CGT planning tool as the assets in your estate get uplifted to the probate value when they are inherited by the beneficiaries of your will. So an alternative to transferring your share to your son now is to leave the property to your son in your will. He would then inherit the balance of the property at its value at that point.