Buying a property from my brother - any advise

JPW1972

I thought there may be implications of me buying a house worth 108k for 54k from a tax point of view i.e. seen as a tax dodge of some description

00ec25

JPW1972 wrote: »

I thought there may be implications of me buying a house worth 108k for 54k from a tax point of view i.e. seen as a tax dodge of some description

CGT
assuming your brother has lived in it constantly since he inherited it as HIS main home then HE will have no tax implications - however, if there was a period when he owned it but lived elsewhere, then there may be CGT implications, but we'd need to know the exact dates of when he lived elsewhere to clarify if there would actually be any tax to pay, one can be liable for tax but not actually have any to pay because the liability is covered by exemptions and allowances


Stamp Duty
I think you can ignore this!

if you qualify as a 1st time buyer then the total value is well within the exempt amount and even if you do not qualifty as a first time buyer then you would still escape SDLT as the tax is based on the "consideration" paid and in this case £54k is within the 0% tax rate band.

JPW1972

My brother has never lived in the property - it has sat empty since my parents died. - what is CGT???

Mila86

a lawyer can answer your question.

00ec25

JPW1972 wrote: »

My brother has never lived in the property - it has sat empty since my parents died. - what is CGT???

OK - a Capital Gains Tax liability arises where a person sells a property that is not their main residence.
Your borther inherited the house at the value used in the probate return. Even through there was no will, I hope to God that probate was correctly completed, as it was certainly applicable.

now the bad news - when bro sells you the property then because you and he are "connected persons" in the legal sense used in CGT then:

a) bro can sell the hosue to you at any price he wants (eg £54,000)
b) you pay him cash and have no tax liability
c) BUT bro must make a CGT declaration (tax return) and is required to use the market value of the property , not what you paid him, as the sales price
d) bro pays tax on the net gain after allowances

eg:
probate value at time of death £50,000
Market value at time of sale £108,000

taxable gain 108 - 50 = £58,000
bro can deduct his personal CGT allowance £10,100

Bro pays CGT on £47,900, some of which will be at 18% and the rest will be at 28% depending his total income this year

Ray of hope - if the inheritance was approx 4 years ago it is entirely possible that the house value may not have increased by much (or even fallen!) since then, so your brother will only pay tax if the gain is more than his 10,100 allowance.
- what was the probate value and how does this compare to the 108,000 valuation you now reckon its worth?
- as advised earlier you will need documentary evidence to support the value you use