As this is not his principle residence and has been used to generate an income it would probably fall under CGT. Not sure if you would use cost to the parents when they bought it or market value when it was given to the son to work out the cost though.
Might be liable to inheritance tax as well depending on value.
Because the property is being let, there could be a CGT liability on the sale.
There are a number of questions that I would ask.
The first question I would ask is whether any CGT was payable on the transfer of the property from the parent's to your client? This is pertinent if the property was not the parent's principal private residence. If it was a buy to let then CGT could have been payable with the open market value of the property at the time of the transfer forming the sales proceeds for CGT purposes. HMRC set up a task force to look into underpaid tax on the transfer of buy to lets back in late 2012.
The second question I would ask is whether the property to be sold was ever the client's private principal residence (after transfer of property from parents)? If it was he can claim principal private residence relief for the period of residence AND the last 36 months of ownership plus Lettings Relief. Please note, however, from 6th April 2014 there is a change to the principal private residence relief whereby your client would only get the last 18 months of ownership.
Finally, if the CGT is substantial then he may have to look at getting relief for the gain by using products like enterprise investment schemes.
-- Edited by Truemanbrown on Saturday 29th of March 2014 12:14:07 PM
