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littlerock
Posts: 1,774 Forumite
My sister and her partner (they are not married) have been discussing rationalising their house ownership with their son, their only child who is in his late 20s. His father who is in his late 60s and still working, owns a house, and his mother (my sister) lives in his father's house with him, there is no mortgage on it. She sold her own house several years ago.
Son will sell his flat, on which there is a small mortgage and clear this,, little to no profit anticipated as he only bought it 2 years ago and it has not increased in value. He will give the money to his father who will use this money plus some savings to buy a nice modern flat of their choosing. Meanwhile his father will hand over his large old house ,no mortgage, to son.
It is true this leaves my sister without her own home but she is not concerned as they have been together a very long time and she is anyway financially independent .
What are the tax implications forceverone if a) son's father survives 7 years from this happening and b) does not survive 7 years (dies and leaves new flat to my sister.)
Son will sell his flat, on which there is a small mortgage and clear this,, little to no profit anticipated as he only bought it 2 years ago and it has not increased in value. He will give the money to his father who will use this money plus some savings to buy a nice modern flat of their choosing. Meanwhile his father will hand over his large old house ,no mortgage, to son.
It is true this leaves my sister without her own home but she is not concerned as they have been together a very long time and she is anyway financially independent .
What are the tax implications forceverone if a) son's father survives 7 years from this happening and b) does not survive 7 years (dies and leaves new flat to my sister.)
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Comments
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Need loads more information,
Starting with the values being talked about and the other assets each has.0 -
Can't the son simply buy the father's PPR at undervalue? No CGT for father as it is his PPR - the difference between value and payment becomes a PET?0
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sons flat is worth around £175k. mortgage £165k.No other assets. Father's house worth around £500k No mortgage been there 30 years. Father has pension but still working plus some savings and a flat in Spain (inherited from his father.)
Local house prices quite low. Father can buy nice flat for himself and my sister to live in £275k. what if son buys new flat for father on mortgage of around £170k with father paying difference ,of £100k which he can afford to do? Or Xylophones suggestion?0 -
son must not buy flat for father because son would then be classed as owning 2 properties (father's flat + father's gifted house) and so be subject to higher rate SDLT and eventually CGT when the flat is soldlittlerock wrote: »Local house prices quite low. Father can buy nice flat for himself and my sister to live in £275k. what if son buys new flat for father on mortgage of around £170k with father paying difference ,of £100k which he can afford to do? Or Xylophones suggestion?
so the current position is:littlerock wrote: »What are the tax implications forceverone if a) son's father survives 7 years from this happening and b) does not survive 7 years (dies and leaves new flat to my sister.)
parents both live in House A as their main residence but it is solely owned by father
son lives in Flat B but will have negligible "profit" (175 - 165 - costs of selling likely to mean he's left with a few £thousand at most)
father wants to down size of Flat C whilst giving House A to son (son sells Flat B
House A is exempt CGT because it is the main residence, therefore no CGT implications if given to son.
Value of the gift (or value of the discount if sold to son at undervalue) would indeed be a PET for IHT purposes. If father lives for 7 years then the gift is no longer part of his estate for IHT purposes. If father dies before 7 years then normal PET rules apply and the gift will form part of father's estate on a sliding scale as per the "7 year rule"
https://www.gov.uk/inheritance-tax/gifts
father leaves flat to his unmarried partner:
- he must do this via a will. Without a will she has no entitlement to it because under intestacy rules an unmarried partner has no claim. In such circumstances it would be the son who would automatically inherit the father's estate rather than her.
- Father's IHT threshold is limited to the single allowance and has no spousal transfer element obviously, but the flat would be his main residence, so he would get the benefit of the extra allowance for main residence, therefore whether father would have any IHT liability at all depends on the totality of his position - which is is impossible to answer on the info so far0
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