transfer house as a gift

funkman

i bought my parents house under the right to buy scheme 6 years ago. i paid for it in one lump sum. the title deeds are still under my mothers name. i would like to have the house in my name.

what is the best way to go about this and what tax liabilities arise?

she lives in the house by herself. i have a note from my solicitor stating that i paid for the property (for council tax reasons).

Robert_Sterling_3

I may be wrong but it sounds as if your mother bought the house under the right to buy rules.

Sonofa

Your parents had the right to buy, not you. I'm not sure what relevance your solicitor's note has? Council tax or otherwise.

I assume 'right to buy' means that ownership of a council property can be transferred to the tenant regardless of who actually pays for the property? Beyond that I would assume you are in the same boat as anyone else who has an elderly parent (owning property) on the cusp of needing means tested residential care?

Don't get me wrong; I'm not against what you're trying to do, but I think it usually boils down to paying for the care until the equity from the house (sale) drops below the limit or you suck it up for inheritance tax don't you?

socrates

Sonofa wrote: »

Don't get me wrong; I'm not against what you're trying to do, but I think it usually boils down to paying for the care until the equity from the house (sale) drops below the limit or you suck it up for inheritance tax don't you?

No on the face of it - it does not seem you are against it at all...

silvercar

I don't know what tax you are thinking of.

For inheritance tax, she would have to survive for more than 7 years after the transfer for the property to be excluded from her estate. Even then you should search 'gift with reservation' as you are getting the property but (I presume) she has the right to live in it.

For capital gains tax, you would be taxed at the time of sale on the gain in value from when you acquired the property to the time of sale. The starting point for the initial value would be its current value less an amount due to the fact that it is occupied by a sitting tenant paying no rent (which is effectively your mother) rather than true market value. The revenue could start digging and decide that you were the beneficial owner from the moment it was bought, especially with your solicitor's note.

If you were intending charging your mother rent (as a way of taking money out of her potential estate rather than her claiming housing benefit, which would be unlikely being you are related) then you would need to declare the rent for income tax purposes.

Nothing wrong, in my eyes, in buying a parent their home to live in for their twilight years. What is wrong is screwing the system and your parent to get your hands on a property cheap and then evict the parent. In offering this advice I am presuming that you fall into the former catagory!

silvercar

JUst to add, the note saying you paid for the property would be to stop the local authority assuming your mother received market value for the property on transfer to you and then being expected to pay for her own care.

funkman

from your answers i searched for some info about tax implications. for IT - nothing as the threshold is around £300,000.

for CGT is more complicated as although i thought my mother would qualify for Private Residence Relief, it seems - 'If you buy a house for a relative to live in and don't live in it yourself, you won't get Private Residence Relief when you come to sell or dispose of the property.' As individuals get £9600 a year allowance, an 18% CGT on the market value of the property ( minus the purchase price) would give a figure around £2000 to £3000.
Thats if the Revenue know i paid for the house. I dont need to show them the letter i recieved from the solicitors do i? i dont know how far they dig.

So now i need to know if i were to live in the house (and for how long) with my mother would this qualify for relief of CGT. i could bear that, being looked after again. She lives rent free. We just want the house free from any legal/finincial ties.

silvercar

TBH a CGT bill of 2-3k is not that great in the scheme of things. Suggests you have made a gain of about 26k max??

You could move in (properly). General guidelines say about a year to be above suspicion, though technically there is no minimum time. Moving in only gives you relief on a proportion of CGT, from the time you moved in and the last 3 years of ownership, so it won't necessarily remove all the liability.

googler

silvercar wrote: »

I don't know what tax you are thinking of.

For inheritance tax, she would have to survive for more than 7 years after the transfer for the property to be excluded from her estate. Even then you should search 'gift with reservation' as you are getting the property but (I presume) she has the right to live in it.

For capital gains tax, you would be taxed at the time of sale on the gain in value from when you acquired the property to the time of sale. The starting point for the initial value would be its current value less an amount due to the fact that it is occupied by a sitting tenant paying no rent (which is effectively your mother) rather than true market value. The revenue could start digging and decide that you were the beneficial owner from the moment it was bought, especially with your solicitor's note.

If you were intending charging your mother rent (as a way of taking money out of her potential estate rather than her claiming housing benefit, which would be unlikely being you are related) then you would need to declare the rent for income tax purposes.

Nothing wrong, in my eyes, in buying a parent their home to live in for their twilight years. What is wrong is screwing the system and your parent to get your hands on a property cheap and then evict the parent. In offering this advice I am presuming that you fall into the former catagory!

I find myself in a similar situation; elderly relative owns home, mortgage-free, currently setting power of attorney in place such that I can handle affairs if/when relative lacks capacity. I'm son and heir, and looking at possibilities for transferring the house now, and what the implications are of 'means tested residential care' on relative's estate, and how I/we retain control of things rather than it being assumed by the state. If I've understood things correctly;

For IHT, if the house is transferred to me without payment taking place, there's no immediate IHT liability; but if relative passes away within 7 years, and the house forms part of an estate of over 300k, then there is.

"For capital gains tax, you would be taxed at the time of sale on the gain in value from when you acquired the property to the time of sale."

So again, no immediate liability, and unless the value of the house goes up between it being transferred to me, and the time at which it's sold, there's no capital gains liability........?

silvercar

googler wrote: »

I find myself in a similar situation; elderly relative owns home, mortgage-free, currently setting power of attorney in place such that I can handle affairs if/when relative lacks capacity. I'm son and heir, and looking at possibilities for transferring the house now, and what the implications are of 'means tested residential care' on relative's estate, and how I/we retain control of things rather than it being assumed by the state. If I've understood things correctly;

For IHT, if the house is transferred to me without payment taking place, there's no immediate IHT liability; but if relative passes away within 7 years, and the house forms part of an estate of over 300k, then there is.

Correct, AFAIK. Though you should read about "gifts with reservation". If the relative is gifting you the property and then still lives in it, it can be part of their estate indefinitely.

"For capital gains tax, you would be taxed at the time of sale on the gain in value from when you acquired the property to the time of sale."

So again, no immediate liability, and unless the value of the house goes up between it being transferred to me, and the time at which it's sold, there's no capital gains liability........?

Nearly. Even if its value didn't change, you are acquiring it with a sitting tenant paying no rent and selling it with vacant possession.