New capital gains tax query

I assented a property back in 2013 to a brother and sister following the death of their Mother. The property remained unoccupied whilst it was refurbished and then rented out until 2019. In 2019 the brother and his wife moved into the property paying half the rent paid by the final tenant due to the sister. The brother and sister have agreed a price at which the sister will be bought out but the brother is paying a lump sum and the balance under a loan agreement (yet to be drawn up) at 3% per interest. He is not remortgaging. There will be a gain as the payment to the sister will be higher than the probate value but possibly less than the market value. What are the cgt implications and will sdlt be payable on any of these transactions? I act for the sister. Can we achieve equality for brother and sister?

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The base cost of the sister will be a fraction (?50%) of (presumably) the market value on the date of death. No discount for joint ownership: CG31140. The sale proceeds will be market value because brother and sister are “relatives” and so “connected persons” but market value of a half share, so 10% discount! If the sale price is not market value that would matter for IHT (overvalue for the brother, undervalue for the sister), and beware the terms of the loan agreement which could be a transfer of value, but not CGT.

SDLT is chargeable on the price paid. No first time buyer’s relief.

“Consideration” for CGT is “deemed to be for a consideration equal to the market value of the asset” under ss17 and 18. What if the brother can’t pay? Can s48 (irrecoverable consideration) apply? I have never had to encounter this point but the final words of CG14930 are somewhat ambiguous:

“More generally, where consideration for a disposal takes the form of money’s worth, so that it has to be valued at the time of the disposal for the purpose of the computation, any shortfall in the value of that money’s worth on receipt cannot give rise to a claim under Section 48. Section 48 applies only where some or all of the actual consideration due under the contract is irrecoverable.” But what if the actual consideration is above or below market value?

Jack Harper

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Thank you for your comprehensive response. It is much appreciated.

Kind regards,

Claire Flood.

The transfer of the property in 2013 likely triggered CGT based on the probate value. Rental income until 2019 is subject to income tax. Brother moving in may alter CGT implications. The buyout may incur CGT for the sister based on the difference between the buyout price and probate value. SDLT may apply if consideration exceeds thresholds. Seek professional advice to ensure equality in tax treatment.