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Hello Sir I think you missed my question:
please let me know if it’s not mentioned that the investment property is commercial then we apply the higher CGT rates, right? assuming that it’s residential?
As I came across this ques ”Kendra” that’s what theyve done.
I did miss your question – my apologies – but I have now answered the question and if you want to copy the question “Kendra” to me I will look at the wording in the question for you
Thank you for replying sir, here is that ques: Only (1) is relevant to my doubt.
Kendra, aged 93, is unfortunately in poor health with just a few months left to live. She has made no lifetime gifts.
Kendra owns the following assets:
””'(1) An investment property valued at £970,000. The property has never been occupied by Kendra, and if it were disposed of during the tax year 2019/20 the disposal would result in a chargeable gain of £174,000.””’(2) Building society deposits of £387,000.
(3) Investments in Individual Savings Accounts (ISAs) valued at £39,000 and savings certificates from National
Savings & Investments (NS&I) valued at £17,000.
(4) A life assurance policy on her own life. The policy has an open market value of £210,000, and proceeds of
£225,000 will be received following Kendra’s death.
None of the above valuations are expected to change in the near future. The cost of Kendra’s funeral will be
£12,800. She also has an outstanding unsecured loan of £1,200 which is due to be repaid on her death.
Under the terms of her will, Kendra has left her entire estate to her children.
The nil rate band of Kendra’s husband was fully utilised when he died ten years ago.
For the tax year 2019/20, Kendra will pay income tax at the higher rate.(b) Advise Kendra why it would not be beneficial to make an immediate lifetime gift of the property valued at £970,000 to her children.
Ans:(b) As the property is not expected to increase in value in the near future, there is no inheritance tax benefit in
making a lifetime gift. Kendra would need to live for three more years for taper relief to be available.
Also, a lifetime gift would result in a capital gains tax liability of £48,720 (£174,000 at 28%) for 2019/20,
whereas a transfer on death would be an exempt disposal.Thank you for providing the information – the statement that the property is an “investment” property is insufficient evidence to determine the CGT rate, for that we still need to know whether it is commercial or residential.
It is therefore a poorly worded question – if that happens on a written question – which I trust will not happen in the exam! – then you are able to state your assumptionHello Sir and Draiells,
Does the wording ” The property has never been occupied by Kendra” have any relevance?
I had the same doubt while doing this question and later assumed that this wording might be the proof to the property being residential.Regards.
It is certainly suggestive that the only reasonable assumption – especially given her age – is that it is residential
I have Kaplan revision book, and it clearly says residential:
” A residential property valued at £ 970,000…..”may be there is an error in your revision kit…
Thank you for that szogun – I feel sure that in the exam they would make the information clear so do not worry!
Sometimes what happens when the legislation changes is that the updating of past exam questions is not always perfect and hence these issues arise but they were not a problem when the examiners set the original question.
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