Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • littlerock
    • By littlerock 12th Jul 17, 8:10 AM
    • 1,136Posts
    • 176Thanks
    littlerock
    tax implications of house ownership rationalisation
    • #1
    • 12th Jul 17, 8:10 AM
    tax implications of house ownership rationalisation 12th Jul 17 at 8:10 AM
    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.)
    Last edited by littlerock; 12-07-2017 at 8:15 AM.
Page 1
    • getmore4less
    • By getmore4less 12th Jul 17, 8:34 AM
    • 29,745 Posts
    • 17,788 Thanks
    getmore4less
    • #2
    • 12th Jul 17, 8:34 AM
    • #2
    • 12th Jul 17, 8:34 AM
    Need loads more information,

    Starting with the values being talked about and the other assets each has.
    • xylophone
    • By xylophone 12th Jul 17, 9:39 AM
    • 22,852 Posts
    • 13,207 Thanks
    xylophone
    • #3
    • 12th Jul 17, 9:39 AM
    • #3
    • 12th Jul 17, 9:39 AM
    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?
    • littlerock
    • By littlerock 12th Jul 17, 10:23 AM
    • 1,136 Posts
    • 176 Thanks
    littlerock
    • #4
    • 12th Jul 17, 10:23 AM
    • #4
    • 12th Jul 17, 10:23 AM
    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?
    Last edited by littlerock; 12-07-2017 at 10:27 AM.
    • 00ec25
    • By 00ec25 12th Jul 17, 11:03 AM
    • 4,756 Posts
    • 4,118 Thanks
    00ec25
    • #5
    • 12th Jul 17, 11:03 AM
    • #5
    • 12th Jul 17, 11:03 AM
    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?
    Originally posted by littlerock
    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 sold

    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.)
    Originally posted by littlerock
    so the current position is:
    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 far
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,874Posts Today

8,365Users online

Martin's Twitter