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  • FIRST POST
    • Izzy_Skint
    • By Izzy_Skint 18th Jun 17, 7:07 PM
    • 12Posts
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    Izzy_Skint
    MOTHER BUYING NEW HOUSE IN MY NAME - Help!
    • #1
    • 18th Jun 17, 7:07 PM
    MOTHER BUYING NEW HOUSE IN MY NAME - Help! 18th Jun 17 at 7:07 PM
    Hello

    I'd really appreciate some help with this as I'm very worried.

    I'm married and live in a mortgage free property in Devon. The house is in my Wife's name as it was bought by her prior to our marriage.

    Now the worry........

    I already own 50% of my Mothers home in Manchester as i was added to the title deeds 25 years ago after taking out a part mortgage for it. She now wants to sell the house and buy a new home but want's it put solely in my name.

    So we own the house to be sold 50/50 but buying another property to be put solely in my name.

    She will live at the property rent free but will be paying the bills.

    I'm worried about any TAX i'd need to pay if the house is to be put solely in my name? It's awkward because i already own 50% of the property being sold, she will be passing her 50% to me in way of putting the new house in my name.

    I'd very much appreciate some help & advice.

    Many Thanks
    Izzy_Skint
Page 2
    • Keep pedalling
    • By Keep pedalling 19th Jun 17, 4:59 PM
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    Keep pedalling
    The extra 3% only applies to buying an additional property, it does not apply to the new joint home as the existing home will be sold at the same time, so no change in the number of homes owned

    If home ownership remains 50/50 then yes only her share can be used for care costs..
    • AdrianC
    • By AdrianC 19th Jun 17, 5:07 PM
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    AdrianC
    The extra 3% only applies to buying an additional property, it does not apply to the new joint home as the existing home will be sold at the same time, so no change in the number of homes owned
    Originally posted by Keep pedalling
    No, it applies because the purchase is NOT the OP's primary residence.
    • Pixie5740
    • By Pixie5740 19th Jun 17, 5:08 PM
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    Pixie5740
    The extra 3% only applies to buying an additional property, it does not apply to the new joint home as the existing home will be sold at the same time, so no change in the number of homes owned

    If home ownership remains 50/50 then yes only her share can be used for care costs..
    Originally posted by Keep pedalling
    That's not quite how SDLT works. The new property, if bought in joint names, will be additional to the OP's main residence and therefore the higher rate of SDLT will be due.

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/570876/SDLT_Higher_rates_for_additional_properties.pdf
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • 00ec25
    • By 00ec25 19th Jun 17, 5:29 PM
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    00ec25
    The extra 3% only applies to buying an additional property, it does not apply to the new joint home as the existing home will be sold at the same time, so no change in the number of homes owned
    Originally posted by Keep pedalling
    no, the OP lives with his wife, he no longer lives with his mother. As a married couple they have one main residence between them, the one they live in, even though only the wife owns it.
    OP 's share of mother's new home is therefore OP acquiring an "additional" property which is not replacing his current main home and thereby triggers the higher rate SDLT

    the fact it will be mother's new home is irrelevant. The SDLT rule is applied to each owner individually
    para 3.42 page 15: Where a transaction is entered into by joint purchasers the higher rates will apply if the transaction would be a higher rates transaction for any of the purchasers considered individually. So if there are two individual purchasers and Conditions A to D are all met for one of them only, the transaction will be charged at the higher rates.
    Last edited by 00ec25; 19-06-2017 at 5:46 PM.
    • 00ec25
    • By 00ec25 19th Jun 17, 5:36 PM
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    00ec25
    B) Sorry, need to get my marriage date right! Blame the heat!
    We (me & mum) purchased the property to be sold in Nov 1992 for the sum of £175,000. It was both our main residence and we owned no other property. So on those dates i lived full time in the property for 21 years as i moved out after marriage in October 2013.
    Originally posted by Izzy_Skint
    you own 50/50 with mother...

    let us say you sell mother's current home in July 2017, that means your ownership period would be 297 months. You lived there for 252 months to Oct13. Your PRR is thus 252 + 13 = 265

    the gross gain would be 450 - 175 = 275,000 x 50% = 137,500
    you would also need to deduct buying and selling costs for which you should have documentary evidence as they will make a difference to your actual outcome - see below!

    PRR : 137,500 x (265/297) = £122,685

    your net taxable gain is 137,500 - 122,685 - 11,300 = 3,515 taxable at 18% and/or 28%

    so as you see, if you include your 50% share of the buying and selling costs you may well get down to zero or near nothing taxable

    C)
    I fully understand the care home situation so this of course could arise in the future no matter which name it is in. If purchased 50/50 then i can argue only her 50% share would be liable for the care costs surly?

    D)
    Regarding filling in forms after 80 years old!
    Mum is Mum, she worries.

    Please let me know if you need more details and again thanks for everyone's input.
    Izzy_Skint
    Originally posted by Izzy_Skint
    if you actually purchase 50% of the new home (rather than her gifting it to you) then for sure only her 50% is exposed to care home issues

    would of course mean higher rate SDLT and a possible CGT bill again in the future which as mother is 80 years old would be rather silly as you will soon inherit anyway at which point if you were not an owner to start with there would only be inheritance tax to be concerned over, not CGT + IHT (the "double whammy" of DIY inheritance tax planning).

    Talk to your solicitor about the loan/charge option - that should be better.
    Last edited by 00ec25; 19-06-2017 at 5:50 PM.
    • xylophone
    • By xylophone 19th Jun 17, 5:38 PM
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    xylophone
    Surely it is easier all round for you to lend your mother your share of the proceeds and take a first charge on it to protect your interest?

    If your mother is concerned about day to day administration (is there actually much to do) you can either assist or ask her to grant POA with immediate effect?

    https://www.gov.uk/power-of-attorney/overview

    Your mother can leave you the property in her will - the property will be the family home left to a direct descendant.

    https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band

    The value of your loan will be deducted from any IHT owed.

    Have you discussed the issues arising from your mother's proposal with her?
    • getmore4less
    • By getmore4less 19th Jun 17, 5:53 PM
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    getmore4less
    Go back to the original transfer mortgage and check you really have a 50% beneficial interest.

    Being a legal owner on the deeds does not establish beneficial ownership.
    • 00ec25
    • By 00ec25 19th Jun 17, 5:58 PM
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    00ec25
    Go back to the original transfer mortgage and check you really have a 50% beneficial interest.

    Being a legal owner on the deeds does not establish beneficial ownership.
    Originally posted by getmore4less
    ok an issue that should be checked but somewhat unlikely

    for Op to prove that he waived all beneficial ownership rights at the point in time that the "part mortgage" was taken out and he was added to the deeds there would need to be Declaration/deed of Trust in place formally waiving those rights

    retrospectively creating such a document now would be "somewhat" inadvisable if there is years of expenditure "proving" his interest in the property.
    • Izzy_Skint
    • By Izzy_Skint 19th Jun 17, 7:24 PM
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    Izzy_Skint
    Again amazed by the great advice here, thanks for all your time.

    I'm happy for the property to go in my mothers name and yes she has already talked about making another will so the property can be left to me in the future.

    Just so i have this correct, by Loaning my 50% share to my mother and with her name solely as the purchaser the benefits would be the following :

    A) She would pay the standard rate of Stamp Duty which works out at £7,500 instead of the higher £18,000.

    B) CGT & IHT is not applicable.

    C) I (myself) giving her my share would incur no charges regarding tax.

    Does this seem about right?
    Please correct me if there are any fee's.

    -------------------------------
    This just leaves the £100,000 left over from buying a cheaper property. This money would of course become my mothers and would that be subject to any tax for her?

    Thanks again
    Izzy_Skint
    • patman99
    • By patman99 19th Jun 17, 7:39 PM
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    patman99
    Don't forget that if you loan her 50%, you would need to place a first charge against the property to protect your investment. It is up to you whether or not you include an interest clause in this.
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    • Izzy_Skint
    • By Izzy_Skint 19th Jun 17, 8:59 PM
    • 12 Posts
    • 3 Thanks
    Izzy_Skint
    Again amazed by the great advice here, thanks for all your time.

    I'm happy for the property to go in my mothers name and yes she has already talked about making another will so the property can be left to me in the future.

    Just so i have this correct, by Loaning my 50% share to my mother and with her name solely as the purchaser the benefits would be the following :

    A) She would pay the standard rate of Stamp Duty which works out at £7,500 instead of the higher £18,000.

    B) CGT & IHT is not applicable.

    C) I (myself) giving her my share would incur no charges regarding tax.

    Does this seem about right?
    Please correct me if there are any fee's.

    -------------------------------
    This just leaves the £100,000 left over from buying a cheaper property. This money would of course become my mothers and would that be subject to any tax for her?

    Thanks again
    Izzy_Skint
    Originally posted by Izzy_Skint
    OK, noted on the First Charge, thanks.

    What about the last question regarding the £100,000?

    Thanks
    Izzy_Skint
    • getmore4less
    • By getmore4less 19th Jun 17, 9:09 PM
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    getmore4less
    ok an issue that should be checked but somewhat unlikely

    for Op to prove that he waived all beneficial ownership rights at the point in time that the "part mortgage" was taken out and he was added to the deeds there would need to be Declaration/deed of Trust in place formally waiving those rights

    retrospectively creating such a document now would be "somewhat" inadvisable if there is years of expenditure "proving" his interest in the property.
    Originally posted by 00ec25
    I was not suggesting 0% or 50%.

    it may be that the real beneficial interest at purchase was not 50%.

    It may have been the intent was 50:50 and there was a gift element at the time.

    may not matter with the substantial PRR CGT exposure is low.
    • 00ec25
    • By 00ec25 19th Jun 17, 11:15 PM
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    00ec25
    OK, noted on the First Charge, thanks.

    What about the last question regarding the £100,000?

    Thanks
    Izzy_Skint
    Originally posted by Izzy_Skint
    lets just stick with round sum amounts for now, obviously the actuals will be subject to various deductions for the costs and tax as mentioned

    you and your mother own a house 50/50 which you are selling for 450k

    your mother's share is 225k less her share of selling costs. She will spend that money on purchasing a new house which is expected to cost 350k. That means she needs approx another 125k (plus her share of buying costs). As the sold property was mother's main home she has no CGT exposure on her 225k share, so gets it all (less selling costs) but cannot buy her new home which she will own 100% without extra funding.

    your share is 225k less your share of selling costs (AND any CGT if there is some by the time you've crunched the numbers).

    So you have approx £225k of cash available. From that you loan her the 125k she needs from your cash rather than becoming a co-owner of her new house. The remaining 100k of your cash is all yours, it will not "of course become mother's". You can do with it what you want, it is your money, not hers as it is what remains from your share of the sale. There is no further tax to pay on that 100k as you have accounted for that in your CGT calculation.

    note that we have referred to beneficial interest throughout this thread. there is a reason for that, it is the principle that underpins tax law, you split the sale proceeds according to your shares (ie your respective beneficial interests) which you say is 50/50. The 100k therefore is the amount you have not spent from your share, since you started with 225 but have only loaned 125k of it to mother.
    Last edited by 00ec25; 19-06-2017 at 11:28 PM.
    • Izzy_Skint
    • By Izzy_Skint 20th Jun 17, 9:33 PM
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    Izzy_Skint
    Hello 00ec25

    Thanks again for that well detailed reply

    I spoke with a solicitor dealing in property today and it will pan out as you suggested.

    I will loan mother £125,000 of my equity to enable her to buy the property and put a charge on it, the property will then be put solely in my mothers name so she only pays lower stamp duty of £7,500.

    Your advice has been amazing so thanks again

    My wife brought up a good question which we forgot about!
    Before getting married to me she lived with her mother and when her mother died she inherited the property. She then sold that property to buy her first ever property but was charge Stamp Duty. We did question if it was right for her to pay stamp duty but they said because she inherited the property it counts as a first property, does that seem correct to you?

    Thanks again
    Izzy_ Skint
    • Pixie5740
    • By Pixie5740 20th Jun 17, 9:58 PM
    • 10,766 Posts
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    Pixie5740
    My wife brought up a good question which we forgot about!
    Before getting married to me she lived with her mother and when her mother died she inherited the property. She then sold that property to buy her first ever property but was charge Stamp Duty. We did question if it was right for her to pay stamp duty but they said because she inherited the property it counts as a first property, does that seem correct to you?
    Originally posted by Izzy_Skint

    Eh? Which rate SDLT is your wife referring to? The normal rate of SDLT everyone pays when buying a property or the additional SDLT?
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • 00ec25
    • By 00ec25 20th Jun 17, 10:29 PM
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    00ec25
    I spoke with a solicitor dealing in property today and it will pan out as you suggested.
    Originally posted by Izzy_Skint
    thanks for the update, always great to see a real outcome on board posts

    My wife brought up a good question which we forgot about!
    Before getting married to me she lived with her mother and when her mother died she inherited the property. She then sold that property to buy her first ever property but was charge Stamp Duty. We did question if it was right for her to pay stamp duty but they said because she inherited the property it counts as a first property, does that seem correct to you?

    Thanks again
    Izzy_ Skint
    Originally posted by Izzy_Skint
    partial data repeated second hand never helps....
    - she inherited a property.
    - she sold that property
    - she bought another property

    When was the completion?

    The Govt did run an incentive scheme for first time buyers between March 2010 - March 2012 where SDLT was waived for first time buyers. The criteria for that were very strict and inheriting and then selling a property would absolutely not have entitled the wife to be classed as a first time buyer for SDLT purposes. Is that what your wife is trying to remember?

    since March 2012 anyone and everyone pays SDLT at either the standard rate or additional rate depending on the circumstances. First time buyer status now irrelevant to whether you pay SDLT, inheritance may be relevant in specific circumstances in respect of the additional rate only as explained in the guide referenced at post #23 above...

    PS time to change your forum name from izzy-skint to izzy-rich
    Last edited by 00ec25; 21-06-2017 at 11:07 AM.
    • Izzy_Skint
    • By Izzy_Skint 22nd Jun 17, 9:38 PM
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    Izzy_Skint
    LOL! I'm not sure about Izzy Rich! Used to be .

    Again the advice you gave 00ec25 was SPOT ON!
    So many forget the importance to return and update but this will hopefully help others in the same situation.

    Your right again, my wife did inherit the property so it did count as her first home.

    Hoping i can return to help others as you have me.
    Thanks again
    Izzy
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