My parents want to give their holiday cottage to myself and my brothers, the idea being if they survive another seven years, it won't qualify for Inheritance tax. Anyway, they've taken legal advice re the giving it side, I was just wondering what the tax position was for the receiving side eg do we all three have to declare 1/3 of the value of the property for income tax?
Any IHT experts on here?
my understanding is that as a recipient, you don't have to declare that gift - at the time.
However - obviously you know this - any income from letting it out will be taxable; any capital gains from selling it will be taxable; and how will it work if one of you wants to sell up / get out when the other two don't?
.. not an expert BTW ..
obviously you know this
Actually, I know bugger all, just started thinking about it. When I get back from holiday, I'll have to talk to an accountant about the finer details.
accountant would be useful; a solicitor - even just a semi-decent one - would raise the practical and pragmatic issues that might arise - they'll have seen it all before and may even suggest options, but they may / ought to speak to your parents and brothers as well.
Do your brothers /want/ the holiday cottage? if not, could it be mortgaged or similar instead of being a source of grief in 7 years time..?
Footflaps, see an accountant. The inherantance tax position is correct so long as you parents don't die witin the next 7 years, otherwise it forms part of their estate. The holiday cottage would be liable for capital gains to your parents on the profit they have made on it when they give it away to you. You will also have capital gains tax when you come to sell it provided it has gone up in value from when it given to you.
Any income (less expenses) you make on renting the property until you dispose of it will need to be declared to HMRC on a Tax Return.
wasn't sure about the capital gains tax position if the gifter dies within 7 years - it would become a potentially exempt transfer but I would have thought at the value (you will be getting it valued first..) it was gifted. Depends on the value of your parents assets at the moment but if it's approaching 2 * IHT allowance then I see their concern.
Of course the CGT will be liable on any increase in cottage value from when they bought it to when its gifted, as would be I think be the case anyway.
I'd guess their estate is probably getting on for 3x IHT allowance, so there will be a large tax bill when they die. Cottage alone is a three double bed detached converted farmhouse with own garage in the center of a popular village in the Yorkshire Dales, so probably not far off 1x IHT on its own.
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