Sale at undervalue- CGT treatment?

[TonyH]

If someone wants to sell you their house for less than it's true valuation, 50% in fact. Does this create any problems. Someone has said that a certain amount of tax will be due.
I ask this because a friend lives with and elderly relative who has offered her the house for half price providing she can still live there.

[Tax Accountant]

If someone wants to sell you their house for less than it's true valuation, 50% in fact. Does this create any problems. Someone has said that a certain amount of tax will be due.
I ask this because a friend lives with and elderly relative who has offered her the house for half price providing she can still live there.

It appears that the elderly relative will be disposing of her ''only or main residence'' and therefore any gain on the half sale/half gift will be covered by PPR relief. Therefore, there may not be any Capital Gains Tax liability.

However, the elderly relative may become liable to Pre Owned Assets Tax. This is an Income Tax charge on the donor based on the value of the benefit they retain.

To avoid the above mentioned Pre Owned Assets Benefit In Kind Income Tax charge, the elderly relative may be able to have the gift treated as a gift with reservation of benefit (GROB), ie make the gift ineffective for Inheritance Tax. If so the gift will continue to count as her asset when calculating IHT liability on her estate when she dies.

But this may not cause her any concern if the total of her estate, including the value of the gift, does not exceed the nil rate band, presently £285,000.

Ramnik