Disposals to family members – beware of the ‘market value’ rule
Capital gains tax is due on the profit when you dispose of an asset that’s increased in value even if that asset is disposed of to a family member.
Transfers of assets between spouses and civil partners are deemed to be that which gives rise to neither a gain nor a loss. The effect of this rule, which is very useful for tax planning purposes, is that the transferee simply assumes the transferors base cost – and the transferor has no capital gain to worry about.
It is when the asset is sold or transferred between other family members (i.e. siblings, child, parent) that you must be careful. Any sum paid is ignored and instead, the market value of the asset at the time of the transfer must be used to work out any capital gain. This may give rise to an unexpected tax liability so it is always wise to check with a tax adviser before such a transaction takes place.
Be careful, if the asset is a UK property that is not your main home the capital gain needs to be reported and paid to HMRC within 60 days of completion.