Property Gift Advice please!

gbee_2

I am a completly and utterly new to this! Am looking for advice as am a dead end.
I have been 'given' a house, absolutely run down and requiring a good £15k to do it up. This is a problem in itself. However, there are also debts on the house regarding water/gas bills etc. (These were not caused by myself or family but a letting agent who we trusted to look after the property but actually abused it instead. Court action against him has resulted in zilch.)

I am the daughter who is taking over the house and was wondering if anyone had any ideas about the following:
can I create a business name and change the name on the title deeds. Can this name be solely used for the house reason only?
If i did so, would this avoid the issue of me being lumbered with the debts on the house?
Will it also avoid inheritance/CGT?
Is it illegal???

It has no mortgage and is a freehold property.

Any comments will be taken - but I am truly confused and absolutely ALONE in this and am desperate for some help.

Ian_W

I'm not an expert but at least giving some of my thoughts may bump your post and catch the eye of someone who is.

can I create a business name and change the name on the title deeds.

If you have a shop and call it "Roys Rolls" you're still a sole trader and liable individually for tax. You'd need to create a legal entity, a company, to move away from being personally liable and this would involve expense and I'm not sure would acheive what you want.

If i did so, would this avoid the issue of me being lumbered with the debts on the house?

I would have thought the debts on the house were actually against a named individual who was contractually responsible to the utilities. If the title was transfered to you as an individual I wouldn't have thought you would be responsible for them unless you were that individual.

Will it also avoid inheritance/CGT?

Neither of these is easy to avoid, governments try not to do "easy to avoid" taxes for obvious reasons. There may be an issue of CGT if/when the title of the property is transfered to you but that falls to the person who makes the "gain" at this stage. If you intend to live in the property there shouldn't be a CGT issue for you but circumstances will dictate whether IHT comes into play.

Is it illegal???

From your post it's very difficult to tell - avoiding tax is perfectly legal, evading it isn't. I really think you need to post some facts before anyone can really advise. How about who owns the prop, how long they've owned, value, when they intend to transfer ownership to you etc, etc? Without a bit more of the story, the questions aren't answerable.

silvercar

The debts from the water and gas bills will be in somebody's name rather than the house. The utility companies can pursue the person at their leisure. You need to phone them and say you want service from a certain date, in your name as the new owner.

Transfering to a business name would mean that when you sell the property the proceeds will belong to the business not you. You would have to pay all sorts of taxes to transfer the proceeds to you.

CGT will occur when you sell the property.

Best to put tax questions on the tax board, I think there is some discussion there about CGT and IHT issues.

Inheritance tax occurs when the value of the estate exceeds a certain amount (about £280,000) and is paid from the estate. I guess that means now if you are sorting out the estate.

gbee_2

Thank you all. I will post this on the tax forum and see replies too.
It was mentioned that I need some more facts..so here goes:
How about who owns the prop?

At present the property belongs to parents in joint names. There is no mortgage outstanding but endowment 'charges'/'fees'/whaterever proper term is, is still being paid. AS far as we are aware the endowment is on track and is due 2011.

how long they've owned?
Had the property since 1988. It is a semi commercial property and was run as a shop for while until business failed. At that point the house was rented (top half, non-commercial bit) A letting agent was introduced after a tenant abused the property. Then the letting agent abused the property. Abuse occured due to the distance we were from the property thus poor management. House has now been empty for the past 10 years!

Value? Well if it was renovated the property would have a value in the region of £100k - £120k. Right now, who knows - it is dire and would probably have to be sold at a loss and on auction. I do know that neighbours all still own their property but have made them into rentable properties for the past 7 yrs or so. I also know that one neighbour sold upstairs portion of house under leasehold for £113k. So thats the value.

when they intend to transfer ownership to you?
Well as soon as possible. Both have sort of washed their hands of it and are pretty much saying 'have this, make something of it, dont knock a gift horse in the mouth!' furthermore, it is to be shared with all 'offspring' (of which = 4) but for the meantime, its up for grabs by me.

Hope this makes the situation clearer.

Thank you for the last 2 replies. I dont want to give up this oppurtunity, so again I am extremely grateful for any comments.

gbee_2

is there anything i missed out?

silvercar

Your parents would have capital gains tax to pay on the difference between its value now and its value in 1988. There are certain allowances to knock off including a personal allowance of about 8k each.

The endowment policy is separate and your parents obviously get to keep the proceeds.

I don't know if you will own it outright or a quarter each. Whichever way round the new owner(s) have CGT to pay if it is sold on the difference between its current market value and the value when it is sold. If you do it up first the costs can be put against the profit.

Do what is sensible, don't let the tax implications govern what you do.

Provided your parents live for 7 years after they gift the house there are no IHT implications. Otherwise it would form part of the estate.

Ian_W

Just to add to silvercar's response one of the other allowances they could claim is taper relief or indexation for the years prior to 1997 which should reduce their "gain" significantly as the relief becomes greater the longer you own and their personal GCT allowance is, I believe, £8.8K each for current tax year. So although there is a potential for CGT when they transfer ownership to you the reality may be that there isn't an aweful lot to pay.
There is also a potential for SDLT [Stamp Duty] for you to pay but from the figures you've quoted the value of the property should be below the threshold in it's current state.
You haven't said how much is owed to the utilities but I believe that is owed by your parents, not against the property although there may reconnection fees to be paid by a new owner. Once you have the property you should be able to raise a mortgage on it which could pay off the bills and provide money to refurb the property.
As the downstairs is a commercial property I think you will need a commercial mortgage and I would suggest you contact a specialist broker to advise. If the downstairs is letable [or could be made so] it may be worth exploring the likely rental potential. If the area is now such that a shop isn't going to be viable then you could explore whether with "change of use" you could also convert that to residential acc which would then give you 2 potential letting properties.
There is a lot to think about and a lot of work to do but a lot of potential if you're prepared to do it. The alternative is to put it into an auction and although it may make a loss, doubtful as it was bought nearly 20yrs ago, it would still be a weight off your parents shoulders.
HTH.

gbee_2

Thank you all, good food for thought