Avoiding tax

sjtaylor_1999

My dad bought a house in june 2001 for me his son to live in while at university, he also owns his own house. Both houses are in his name, what will happen this year if we decided to sell the house, we purchased it for about £23000 and i would say its now worth about £70000. Would he now be liable for capital gains tax or would we avoid it if we sell it within 3 months of leaving uni or transfer the house to me?

thanks for your advice

dougk_2

Personally if i was him, I'd consider letting it out to students like you were and make some regular income from it.

tightbarsteward

Check at http://www.inlandrevenue.gov.uk/ but I think he would be liable for capital gains tax at 40% of profit made. You have to have lived in the property 4 a couple of years 2 avoid paying it i think.

I would keep & rent out.

John_M_Business

Yes, right now, if sold, Capital Gains would be an issue (although if, when you said 'we bought it', you don't mean 'just dad', then this may not be the case). In any case, even if you owned it, if you rented a room in it then it would also be liable for some capital gains in any case.

The best thing you could do to avoid paying is for him to 'give' it to you. Hold on to it for three years before selling. Do not rent it (otherwise Capital Gains comes in to play) again. If you need to sell it today, then I don't think you've got a choice in the matter.

garysletters

I agree with the first replies.
Rent it to students.
you probably have good links with the student union people, or whoever is in charge of accommodation. speak to them.
If you dad just wants to get his money out to spend on other things, he should remorgage the house. (you say its gone up in value quite a lot, he'll get out far more than he put in, AND be able to rent it out to more than cover his mortgage.)
how many bedrooms COULD it have. Maybe you could stay there and rent out a couple of rooms to students, thus you dont have to move back home or find somewhere to live yourself!!!

bridiej

I've moved this into the Cutting Tax board as you'll get more replies in here

Bridiej

MJSW

John_M_Business wrote:

The best thing you could do to avoid paying is for him to 'give' it to you.

This will certainly not work. A transfer between connected persons is deemed to take place at market value for CGT purposes. This suggestion would therefore generate a Capital Gain for the father equivalent to the gain he would have made if he had just sold the property to a third party. To make matters worse, he would have received no proceeds at all from which he can pay the CGT bill from!