Capital Gains Question

Birch_Cottage_Man

Hi I am looking to buy my mother house, she has one of thos lifetime mortgages that charge stupid interest rates so am looking to pay this off release a small amount of capital for her and then sell when well you know the inevitable happens

What I want to know is how this will be treated for capital gains etc as this wont be my main residence, the inheritance tax is a non issue as its well below the £350k threshold.

Any ideas, apparently there are several ways that the house can be bought / transferred and I would like to know if any are more beneficial than others

ceeforcat

Yes - you will be liable for Capital Gains when you go to sell it.

I have two suggestions -

Give your mother the money to buy the house - it could always be left to you in her will and will retain private residence reliefs.

Give your mother the money to pay off those loans.

Provided she is well and will not incur nursing home problems, that is what I would do.

Birch_Cottage_Man

MMM yes I see what you mean however I will be purchasing at a greatly reduced price (just under 50%) so would like to know if its possible to use the actual value when the time comes to sell rather than the purchase price.

What I am doing in simple terms is buying a property for say £50k that is worth £110k the £60k will be done as an equity transfer.

Any ideas?

ceeforcat

Not sure if you are thinking clearly here - if you pay only £50k for a property that is worth £110k, the gain when you ultimately sell when be £60k greater than if you paid full price - your cost price will be 50k! I cannot see how that helps.

jimmo

ceeforcat wrote: »

Not sure if you are thinking clearly here - if you pay only £50k for a property that is worth £110k, the gain when you ultimately sell when be £60k greater than if you paid full price - your cost price will be 50k! I cannot see how that helps.

Tut tut, ceeforcat.
The OP is buying from his mother and they are connected persons. The market value rule therefore applies.
Mind you, I have no idea what the OP means when he/she refers to "an equity transfer".

ceeforcat

Tut tut, ceeforcat.
The OP is buying from his mother and they are connected persons. The market value rule therefore applies.
Mind you, I have no idea what the OP means when he/she refers to "an equity transfer".


Yes jimmo - I absolutely know that - hence my original suggestion in post 2-but I thought that the argument based on simple arithmetic was even more compelling!

CLAPTON

jimmo wrote: »

Tut tut, ceeforcat.
The OP is buying from his mother and they are connected persons. The market value rule therefore applies.
Mind you, I have no idea what the OP means when he/she refers to "an equity transfer".

I think an equity transfer means 'gift'.

John_Pierpoint

CLAPTON wrote: »

I think an equity transfer means 'gift'.

"Transfer the equity"
Sometimes used in the situation where the new owner takes on not just the house but the existing mortgage as well (subject to approval of the mortgagee).

jimmo

ceeforcat wrote: »

Tut tut, ceeforcat.
The OP is buying from his mother and they are connected persons. The market value rule therefore applies.
Mind you, I have no idea what the OP means when he/she refers to "an equity transfer".


Yes jimmo - I absolutely know that - hence my original suggestion in post 2-but I thought that the argument based on simple arithmetic was even more compelling!

Sorry, but I'm struggling with that. If the OP buys a property from mum the market value rule applies and the amount the OP pays to mum will be irrelevant.
If mum sells her house for £50,000 to her son or daughter then mum's disposal value and the child's acquisition value will be the open market value of the asset that changes hands, albeit a house with a sitting tenant paying no rent.
That could be £50,000, £100,000 or a lot more and, if the OP is going to understand this surely he or she needs to understand how the market value is to be determined rather than concentrating on the amount of money that changes hands.

ceeforcat

Yes jimmo - once again I agree. The only point that I was trying to make was that in post 3, the op was suggesting that he was simply trying to reduce his purchase price to as low a figure as possible. While we both know that this cannot be done, I was merely pointing out that, even if it were possible, he would be increasing his capital gain whenever he came to sell.

getmore4less

If you have the cash what about becoming joint owners.

Mums 1/2 becomes yours automaticaly on her death or your 1/2 hers if you die.

No deprivation of assets if you buy around 1/2 at market value.

Reduces the risks of mum becoming homeless if you get into financial difficulties.