Liable to CGT

smokey77

I am currently living in a property which is mortgaged and owned by my father, it is not his primary residence however. I am in the process of buying a property of my own as a FTB and the house I'm living in (owned by my dad) is being used as a deposit (77K), my fathers name will not be on the deeds or mortgage of the new house it will be solely in my name, will he be liable to CGT or any other taxes and what would be the best way to resolve this. I will be having a deed of trust drawn up as I will be living in the new house with my partner should I have something in the deed stating that my father has gifted/given/loaned me this money? Thanks

silvercar

Is the house you are living in being sold or a mortgage taken on it?

If it is being sold it triggers a potential CGT laibility. Has your father lived in the property as his primary residence at any time in the past? If so that will reduce the CGT liability - potentially to zero. If he hasn't lived in it as primary residence then there is a CGT calculation to be done based on the purchase price, sale price and improvements. Either way, post some values and we can do a calculation.

If he is raising a mortgage rather than selling, there is no CGT to worry about....until he sells.

smokey77

The house where I live is owned and mortgaged by my dad in his name he purchased it for 45k and there is a 24k settlement fig on mortgage, it is being bought in as a part x on the new property for 115k. It is not classed as his main residence. The new house will be mortgaged by me and will be nothing to do with my dad but I will be using the equity from the sale of his house as the deposit for my new home, you could say he is gifting it to me I suppose.

anselld

The key question is "Did your dad ever live in it as his main residence?"
If so, what dates?

smokey77

No never it is not his primary residence

silvercar

The "sale" as part of your purchase triggers a CGT liability. So you need to take the market value at sale (as its contribution to your deposit will count as a linked transaction) less the purchase price less any costs of purchase and transfer.

Take off £10,100 which is the CGT allowance, unless used elsewhere.

The remainder is taxed at 18% or 28% depending on your father's personal tax situation. He should include it in his 2010-11 tax return and the tax paid by 31 January 2012. If the sale is delayed beyond 5 April 2011, it all falls into the next tax year.

smokey77

So is it 115 (market value) - 24k (o/s mortgage) - 168 (purchase price of new property) - (purchase costs & transfer) - CGT allowance

Sorry I'm not good at things like this lol

00ec25

smokey77 wrote: »

So is it 115 (market value) - 24k (o/s mortgage) - 168 (purchase price of new property) - (purchase costs & transfer) - CGT allowance

no it most certainly is not - the correct answer is as posted on your duplicate thread on the cutting tax board

JoMac_2

We are in the same boat - my parents remortgaged 8 years ago to buy us a house (extremely kind of them I know), we pay them rent, we really need to move - 2 bedroom house with one baby and another on the way. This obviously isn't their main residence and we will be using the profit on the sale of this house as our deposit for the next. But we'll be paying off what remains on my parent's mortgage and the capital gains tax, we need to drop the asking price to try and shift it but this all means less of a deposit for us.

silvercar

smokey77 wrote: »

So is it 115 (market value) - 24k (o/s mortgage) - 168 (purchase price of new property) - (purchase costs & transfer) - CGT allowance

Sorry I'm not good at things like this lol

More like 115k less the original purchase price less a bit more for buying and selling costs less CGT allowance = liability.

Then multiply liability by 18% / 28% depending on tax situation.