selling house to daughter

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patm62
patm62 Posts: 22 Forumite
in Mortgages & endowments
hi there, i'm selling my house to my daughter at about half of its value, altho she knows that if i'm alive and well later down the years, i'll be asking for more money! Value's about £180,000. she lives and works abroad just now, and the solicitor there tells her she'll have to pay about £1500 stamp duty as she's not paying the market value. is this right, and if so, is there no way round it?
cheers pat
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  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
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    Why are you doing this patm?

    If it is to avoid inheritance tax and you plan to stay in the house, it won't work.
    Trying to keep it simple...;)
  • patm62
    patm62 Posts: 22 Forumite
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    no, not avoiding anything, just to release some capital for myself rather than doing equity release, and it also gives her something for her future.
    cheers pat
  • Bossyboots
    Bossyboots Posts: 6,746 Forumite
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    I can't help thinking you would be better off selling her a share of the property, not the whole thing.
  • patm62
    patm62 Posts: 22 Forumite
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    so no-one knows about this stamp duty stuff? thanks anyway
    cheers pat
  • Bossyboots
    Bossyboots Posts: 6,746 Forumite
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    patm62 wrote: »
    so no-one knows about this stamp duty stuff? thanks anyway
    cheers pat

    The concern here is that you have more issues to consider than the stamp duty. You may already have gone through them, but folks round here tend to try to make sure no-one is going to get into difficulties and that sometimes means not answering a straight question immediately.

    Knowing more about the circumstances would help with any possible suggestions to reduce the stamp duty liability but put simply, the stamp duty will be payable at that level because the transaction value is £180,000, regardless of the amount of money actually changing hands.
  • Tim_L
    Tim_L Posts: 3,816 Forumite
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    Any scheme transferring ownership of a house in full or part to a relative is fraught with problems, and frankly I'm amazed the solicitor hasn't raised several red flags here. I've seen lots of these peculiar DIY ideas to raise cash from property or avoid tax, and they almost always end in serious trouble.

    If you are living in the house but have sold it, then the daughter has a CGT liability problem if it is ever sold as it is not her main residence. If it is sold at less than market value there is a potential IHT liability on top of that. If a care home is ultimately needed then you will probably not be funded for it because you have sold an asset at less than market value. Whatever the motives, this will look to the authorities like a tax avoidance scheme, and you can expect some fairly serious scrutiny.

    Transferring a share is a complete no-no, incidentally. It creates big problems for both parties when the house needs to be sold (you sell, your daughter gets a big CGT bill, if she is forced to sell through for example financial difficulties then you lose your home).

    You pay stamp duty on the actual market value of the house, not the sale price. This is for fairly obvious reasons: it avoids people splitting the sale price between house and fixtures and fittings to avoid tax.

    Get a good solicitor and understand the implications of what you are attempting to do before starting out. And then don't do it.
  • mountainofdebt
    mountainofdebt Posts: 7,795 Forumite
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    Apart from all the legal stuff that has already been mentioned, how are you going to force your daughter to hand over more cash if you need it in the future?

    You may get on well now but what happens if you need the dosh but she can't (or won't?) give it to you?

    That may be why she has to pay Stamp Duty
    2014 Target;
    To overpay CC by £1,000.
    Overpayment to date : £310

    2nd Purse Challenge:
    £15.88 saved to date
  • Tim_L
    Tim_L Posts: 3,816 Forumite
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    It's not really a question of getting extra cash if there's a loose agreement to do this - usually this is OK in families - the problem is that you are selling something at less than market value and retaining use of the asset. This causes all manner of knock on problems. GET PROPER PROFESSIONAL ADVICE on the scheme - don't rely on a conveyancing solicitor telling you about the pitfalls.
  • Bossyboots
    Bossyboots Posts: 6,746 Forumite
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    Tim_L wrote: »
    Transferring a share is a complete no-no, incidentally. It creates big problems for both parties when the house needs to be sold (you sell, your daughter gets a big CGT bill, if she is forced to sell through for example financial difficulties then you lose your home).


    Transferring the whole is what will give the problems you state. Retaining a part ownership of the property will allow the OP to retain a say in what happens to it. If she hands over the whole title, she can be evicted at any time on the whim of the daughter or the demands of creditors through the proper channels. She has no control of it being sold from underneath her unless she retains a share. If she retains a share in the house, creditors are more likely to attach a charging order to the daughter's share than try to push for sale. Subsequent partners of the daughter will have an interest in the whole title rather just a portion if the whole property is transferred. A divorcing partner can stake a claim on the property which will be a much larger claim if the whole title is transferred and in this situation there is little or no argument for the property not to be sold (I know someone this happened to).

    The daughter will be liable to an even greater CGT bill if she owns the whole property and it is subsequently sold when not being used as her principal residence. If she only owns half, she only makes a gain on half.
  • Tim_L
    Tim_L Posts: 3,816 Forumite
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    Actually I wouldn't do any of this, whether part or full ownership. It's like arguing about whether it's better to cut one leg off or two. I take the point though.

    I've seen a few people trying this sort of thing, and every time they create quite serious problems for themselves. A friend of mine's mother put three houses in joint names for my friend, his sister, and herself on the death of the father (each is resident in one of the three houses), presumably thinking that this was a good idea for IHT reasons. As a result all three are completely unable to move house, because there's a 40% CGT liability on two thirds of the equity, which means in turn that the actual gain in value is quite seriously reduced. To move would mean serious trading down.

    Basically, get professional advice on the specifics of what is being planned. Don't construct a DIY argument, because it will come back and bite you.
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