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Capital gains on gifted boat?


Durbin

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5 minutes ago, Alan de Enfield said:

Indeed, and ideally you want it to have as high a value when gifted as possible, to ensure that if the value does rise you still have no CGT liability.

But the higher the value, the more IHT, if eligible there will be. The buggers have you either way. 

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I thought some words of wisdom from HMRC may help -

You may have to pay Capital Gains Tax if you make a profit (‘gain’) when you sell (or ‘dispose of’) a personal possession for £6,000 or more.

Possessions you may need to pay tax on include:

jewellery
paintings
antiques
coins and stamps
sets of things, eg matching vases or chessmen

 

You don’t pay Capital Gains Tax on:

your car - unless you’ve used it for business
anything with a limited lifespan, eg clocks - unless used for business

You don’t have to pay Capital Gains Tax on personal possessions with a lifespan of less than 50 years. This covers all machinery, and includes things like antique clocks or watches.

 

So having read all this I am not sure if a boat would come under CGT as I am not sure if a boat has an expected life of more than 50 tears as far as the tax man is concerned.  I suggest you ask HMRC.  But you only make a gain when you sell it.

https://www.gov.uk/capital-gains-tax-personal-possessions

 

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37 minutes ago, rusty69 said:

But the higher the value, the more IHT, if eligible there will be. The buggers have you either way. 

But with careful IHT planning (and reviewed every year to ensure compliance with the current regs) IHT can be drastically reduced unless you are above the million pound mark.

From April 5, each individual can claim an additional allowance of £100,000 to offset the sale of a family home on death, on top of their existing £325,000 inheritance tax exemption. This new tax allowance will rise to £175,000 by 2020, allowing a couple to pass on £1m estates tax-free.

Eit fr missing ltters

Edited by Alan de Enfield
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4 minutes ago, Alan de Enfield said:

But with careful IHT planning (and reviewed every year to ensure compliance with the current regs) IHT can be drastically reduced unless you are above the million pound mark.

From April 5, each individual can claim an additional allowance of £100,000 to offset the sale of a family home on death, on top of their existing £325,000 inheritance tax exemption. This new tax allowance will rise to £175,000 by 2020, allowing a couple to pass on £1m estates tax-free.

Eit fr missing ltters

That's good news, now I just need to find the best part of a million to be able to take full advantage, best start buying lottery tickets again.................

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10 hours ago, Alan de Enfield said:

Indeed, and ideally you want it to have as high a value when gifted as possible, to ensure that if the value does rise you still have no CGT liability.

If you buy it for £1 and sell it for £30,001 you potentially (if in fact it is subject to CGT - speak to your accountant) have a liability of CGT on £30,000

Sorry wrong button :D

...was going to say....only an issue if you don't sell it to a family member at a young age for £1....then they may have 50yrs of use etc. And sell on and on and on....£500 for a house is a great move.

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10 hours ago, Alan de Enfield said:

But with careful IHT planning (and reviewed every year to ensure compliance with the current regs) IHT can be drastically reduced unless you are above the million pound mark.

From April 5, each individual can claim an additional allowance of £100,000 to offset the sale of a family home on death, on top of their existing £325,000 inheritance tax exemption. This new tax allowance will rise to £175,000 by 2020, allowing a couple to pass on £1m estates tax-free.

Eit fr missing ltters

Only applies to direct descendants if im reading it correctly. 

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Sorry to come into this a bit late. I used to work for HMRC, and my specialism was capital gains tax. This will be a long post, but please bear with. 

There is a "market value rule", at Section 17 TCGA 1992, whereby certain transactions are deemed to take place at market value. So in this scenario and drawing on some of the previous comments:

Asset gifted with no consideration passing - disposed of at market value, acquired at market value.

Asset "won in a game of cards" - obvious sham, market value rule applies, so disposed of at market value, acquired at market value. (It's an obvious sham because the "game" could only be played with the intended recipient of the asset. The acid test is whether the party disposing of the asset would have played such a game with a random stranger.)

Asset sold for £1 - the test is whether one party to the transaction had the intention of conferring a gratuitous benefit on the other party. Selling a £30,000 asset for £1: an obvious gratuitous benefit conferred on the buyer. A "creative" description as to condition/low valuation of the asset would have to be supported by appropriate third-party evidence. Market value rule applies, so disposed of at market value, acquired at market value. And staying with this example, if the person buying for £1 then sells the asset for £30,000, the basic CGT computation will not be £30,000 less £1 = gain £29,999. It will be £30,000 less £30,000.

The example of the £500 house purchase - again it would be deemed to have been disposed of at market value, acquired at market value.

But I have good news. Narrowboats are wasting assets, deemed to be so by Section 44(1)(c) TCGA 1992. Section 45 TCGA 1992 states that a chattel (tangible, moveable property) which is a wasting asset shall be exempt from CGT unless it has been used in a trade, profession or vocation (loosely speaking, used as a business asset).

So CGT is usually not chargeable on narrowboats ... in fact not usually on any boat. Why? I hear you ask. Are HMRC being exceedingly generous? No. If CGT was chargeable on any gain on the disposal of such an asset, then it would follow that an allowable capital loss would arise on the majority of disposals. The same applies to cars, for which there is special legislation. You will not pay CGT on any gain on a classic car, but neither can you claim any capital loss on the disposal of a "normal" car. Items such as household furniture etc sold at a loss do not produce allowable capital losses. The main point of this legislation is that the tax lost from allowable losses would far exceed the tax received on chargeable gains - so the simple solution is to make relevant assets exempt.

The points regarding inheritance tax are broadly correct - a gift of an asset or money is a potentially exempt transfer on which IHT might be charged. The IHT charge is tapered as the years pass. 

MP

  • Greenie 2
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  • 1 year later...

I didn't believe boats counted for CGT because I was unable to claim a loss I made. Surely it works both ways? What about as a second home? Say you live in a scruffy tin can but owned a house? What occurs if you sell your house?

Edited by bluegreencanal
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On 27/06/2017 at 01:06, Laurie.Booth said:

A friend of mine "Bought" a house worth £100k for £500. Plus legal fees.

I’m impressed if your friend got away with that. Over here a Notaire would probably refuse to conduct a sale on that basis, as it would be considered a blatant attempt at tax avoidance.

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3 minutes ago, Stilllearning said:

I’m impressed if your friend got away with that. Over here a Notaire would probably refuse to conduct a sale on that basis, as it would be considered a blatant attempt at tax avoidance.

Various councils (Liverpool, Stoke-On-Trent) have sold council houses in need of repair for £1 on several occasions.

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Indeed they have, though that’s not quite the same as Laurie’s scenario involving the “sale” of a house at an artificially low price purely to avoid tax. 

Such deals are the stuff of legend over here with stories of bundles of used notes being passed under tables in a local bar before or after a visit to the Notaire to conduct the official sale. The government has the right for three years after any sale, to check that all has been done legitimately. It is worth remembering that the taxman here has the right to just take money from your bank account if, for example, you haven’t paid your taxes.

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On ‎24‎/‎06‎/‎2017 at 23:08, ianali said:

I wouldnt take all the above replies as gospel. 

 

On ‎24‎/‎06‎/‎2017 at 22:33, Durbin said:

 

If that is the case I'm assuming it would be as simple as just singing it over.

 

I see what you did there ianali in your response to the op, very clever. ;)

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9 hours ago, Stilllearning said:

I’m impressed if your friend got away with that. Over here a Notaire would probably refuse to conduct a sale on that basis, as it would be considered a blatant attempt at tax avoidance.

 

And over here, tax would be due on the transferred value, not the price paid. 

 

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17 hours ago, Stilllearning said:

Indeed they have, though that’s not quite the same as Laurie’s scenario involving the “sale” of a house at an artificially low price purely to avoid tax. 

 

I've just contacted my friend about the sale of his house for £500. It was sold not to avoid tax but sold due to a divorce so his wife would not get the money.

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1 hour ago, Laurie.Booth said:

I've just contacted my friend about the sale of his house for £500. It was sold not to avoid tax but sold due to a divorce so his wife would not get the money.

Lucky for him his ex didn't have the same solicitor mine did or that would have cost him. I had to pay for her solicitor to check the sale to make sure I wasn't pulling a fast one.

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13 hours ago, ditchcrawler said:

Lucky for him his ex didn't have the same solicitor mine did or that would have cost him. I had to pay for her solicitor to check the sale to make sure I wasn't pulling a fast one.

It was sold before divorce was in the process.

:)

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