I’m buying a plot of land and building two houses on it. I want to sell one to my daughter at cost (or even less than cost). What is the capital gains tax (CGT) position? I realise I must survive for seven years to mitigate any liability for inheritance tax, if I transfer at less than cost.
Arthur Weller replies:
The tax rules state that any transfer to a connected person (e.g. a daughter) is deemed to be at present market value for CGT purposes, irrespective of what is actually paid between the two parties. So if you do what you are planning, you will be liable to tax, because presumably the market value of the completed house will be more than the land cost and building costs. From a tax perspective, you are best giving or lending your daughter cash to: (a) purchase the land; and (b) do the building herself. However, this may not be the most practical solution.