My sister and I were gifted 50% each of our parents’ house in April 2014 at a value of £150,000.  
Both parents are now deceased, and we are putting the house up for sale – the guide price was £190,000 to £210,000. An offer for £220,000 has been accepted. Due to a family relationship breakdown, my sister does not wish to receive the proceeds of the sale and is in the process of transferring her share to me so that I own the property 100%. I own my own property, so I will not qualify for principal private residence relief, and I am aware both my sister and I will be treated as connected persons. My sister’s capital gains tax (CGT) gain will be (I assume) £75,000 to either £95,000 or £105,000 (half the guide price, as this would be adjudged the market value) when she disposes or transfers her 50% share (for free). However, for CGT purposes, when the house is actually sold, I am unsure what figure to use for my purchase price; will the purchase price default to £150,000 or will it be £190,000 or £210,000? 

Arthur Weller replies:  

Your assumption about your sister's capital gain when she transfers to you is correct. Her gain will be £20,000 or £30,000, depending on whether the current market value is £190,000 or £210,000. However, if the property is sold shortly afterwards for £220,000, you should use £220,000 as the current market value, making your sister's capital gain £35,000. This is because the £220,000 is the 'reality'. Regarding your capital gain when the house is actually sold, you are effectively making two sales. Your original half, acquired for £75,000 and being sold for £110,000, creates a capital gain of £35,000. And the second half, just now acquired from your sister for £110,000, and being sold for £110,000, creates a nil capital gain for you. So, your total capital gain is £35,000. See tinyurl.com/3s942hpr. Since you and your sister are 'connected persons', the current market value is not only her disposal value but also your acquisition value for the future.