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How to Avoid Capital Gains Tax and Inheritance Tax on the Transfer of Property to Children

How to Avoid Capital Gains Tax and Inheritance Tax on the Transfer of Property to Children

Capital gains tax. Let's first consider the capital gains tax position on property transfers. Assuming the parent company is a resident and resident of the UK, any transfer of ownership will be subject to UK capital gains tax. Therefore you must calculate the resulting profit and it is very important to take into account the compensation of the disposal to reduce that profit.

Please note that the child's UK domicile is not relevant for tax purposes. Therefore, even if they are taxpayers in a tax haven, UK residents and local holding companies must take into account their own tax position on capital gains. You can find the right guidance of inheritance tax rates at

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Because parents are classified as "associated" with their children for capital gains tax purposes, any transfer from parent to child is treated as a market value transfer. Even if the children do not pay the parent's income for the property, the market value of the property must be taken into account when calculating capital gains.

Therefore, again is an increase in the value of the acquisition or testamentary value to the market value at the time of transfer. Note that if the property was purchased before March 1982, special conditions may apply to consider the price as a market value from March 1982 onwards.

Which services are paid for?

This is a relief that can significantly reduce capital gains. The main benefits that any parent may want to consider reducing capital gains are:

Indexation assistance if the property was purchased before April 1998. This adjusts the price (or will value) for the effects of inflation through April 1998.

Cone relief. You need to consider the type of property it is: if you want to transfer residential property, it will almost always be a charitable property. This will reduce your capital gains by up to 40% if you have owned it for at least ten years. If you save less, you will receive a reduced capping rate depending on the ownership period of more than three years (eg a 15% reduction for 5 years). So three years of holdings qualify for a 5% waiver, four years for 10%, and so on. 

This can be very useful as maximum relief on business assets can reduce profits by up to 75%. So if you want to transfer business assets, chances are the profits will be significantly reduced.