I became a British Citizen in 1987, after five or six years of employment and permanent residence, on a work permit in the UK. In 1985, I bought and owned my only flat in London, and lived there as my principal private residence until 1995. In 1995, I left the UK and became non-UK resident. Before leaving the UK, I gave my flat to my British sister as a gift (without, however, officially transferring and registering the legal title to her). Since then, my sister has been living there as the sole beneficial owner. I now intend to legally transfer the title to my sister. The question I have is whether there are any tax implications? As the property was my principal private residence until I gifted it to her, do I understand the rules correctly that there will not be any capital gains tax upon such transfer now? Do I also understand correctly that there is no transfer tax as it is a gift and no money will be exchanged when I now officially transfer the title? Also, as 21 years have already passed since the date of the effective gift, do I understand correctly that the inheritance tax (IHT) ‘seven-year rule’ will not apply from now, as longer than seven years has already expired? Finally, what steps should I take and what documents will I need to present the described facts, and to whom, to ensure I will not become liable for tax?

Arthur Weller replies:
From what you have written, it seems that you transferred the beneficial ownership to your sister in 1995, without transferring the legal ownership. I am hoping that you have written documentation to support this. If so, for tax purposes, your sister has owned the property since 1995. See www.gov.uk/hmrc-internal-manuals/capital-gainsmanual/cg70230. If you now transfer the legal ownership to her that will not trigger any tax - see www.gov.uk/hmrcinternal-manuals/capital-gains-manual/cg10720. As you have correctly written, since you effectively transferred in 1995, the IHT ‘seven-year rule’ will not affect you.