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IHT/CGT/Stamp question
MrConfused
Posts: 17 Forumite
in Cutting tax
guys Im really confused on this situation. Can anyone suggest the best route and if we can avoid stamp duty, and my mother can avoid CGT.
House worth £475k
We are being gifted the house
We are then in 6 months going to remortgage it for £260k, £225k to my mother the remainder £35k is for us to do the house up) which I've been told would all have to go back to my mother, as £260k.
For stamp duty I believe we are better off having the full property being gifted, but this then creates a CGT position for my mother doesnt it? She bought the house in 1986 for approx £80k
If we remortgage for £260k, do we have any stamp to pay?
Are there any other liabilities/tax implications we need to take into acconut, I dont want a nasty tax situ to kick in in say 10 years time that we missed!
Understand the 7 year gifting IHT rule, so thats fine.
House worth £475k
We are being gifted the house
We are then in 6 months going to remortgage it for £260k, £225k to my mother the remainder £35k is for us to do the house up) which I've been told would all have to go back to my mother, as £260k.
For stamp duty I believe we are better off having the full property being gifted, but this then creates a CGT position for my mother doesnt it? She bought the house in 1986 for approx £80k
If we remortgage for £260k, do we have any stamp to pay?
Are there any other liabilities/tax implications we need to take into acconut, I dont want a nasty tax situ to kick in in say 10 years time that we missed!
Understand the 7 year gifting IHT rule, so thats fine.
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Comments
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does your mother live in the house
has she always lived in the house
will she continue to live in the house
will you live in the house once it's yours
why are you doing this0 -
per chance she is getting on in years and they are trying to avoid care home fees. or she has bags of cash and are trying to avoid iht.
why not just buy it at £260,000 and then your mum can give what she want to help doing the house up. if i was the tax man i would be very intrested in someone just giving away £215k. i would recommend going to the real experts for some advice. oh by the way you jammy beggers.0 -
pauletruth wrote: »per chance she is getting on in years and they are trying to avoid care home fees. or she has bags of cash and are trying to avoid iht.
why not just buy it at £260,000 and then your mum can give what she want to help doing the house up. if i was the tax man i would be very intrested in someone just giving away £215k. i would recommend going to the real experts for some advice. oh by the way you jammy beggers.
Beacause the house is worth £475000, therefore sale at undervalue and there is still a gift of £215000, the treatment of which will be determined by the answer to Clapton's questions.0 -
Stamp Duty payable dependent on the residual consideration paid.
If it is > than the SD threshold then it is payable.
CGT should not apply providing this was you mothers sole residence. Private residence relief. If it isa second home or not main residence then it will be liable to CGT. CGT would only apply at time of transfer if it were applicable. If you do not occupy the property as your main residence then you may be liable for CGT in the future.
IHT will be payable uf the asset value, when included with other assets takes your mothers estate over the then in force thresholds at time of death. There is a form you can fill in to advise the HMRC of the amount of transfer and set the timer officially going (IHT500?).
If this is being done to deprive your mother of assets then that is another set of issues but on the basis that you are giving her £215K back and you don't say what other assets she has or current income/debts, health this probably isn't the purpose of your query.
As a PP says, take professional advice, your mother will no doubt be using solicitors to make the transfer. They should provide her with independent advice and will also be able to satisfy the SD and IHT points."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
does your mother live in the house, at present living at her partners but registered at her house for C/Tax etc
has she always lived in the house Lived in the house since 1984 ish
will she continue to live in the house No she will continue to live at her partners, or then move into a flat she is to buy with the money we give her, or possibly if gets ill in later years move back in with us
will you live in the house once it's yours. Yes, we are selling our house now, to be able to move into hers0 -
well, it would seem your intend is to defraud the HMRC by having the house 'gifted' to you and then, later remortgaging and 'paying' your mother for the house.
I don't know whether this would succeed nor do I know the consequences if HMRC were unhappy.0 -
well, it would seem your intend is to defraud the HMRC by having the house 'gifted' to you and then, later remortgaging and 'paying' your mother for the house.
I don't know whether this would succeed nor do I know the consequences if HMRC were unhappy.
Query - What is your resoning for fraud?"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »Query - What is your resoning for fraud?
it would seem that the gift of the property would avoid stamp duty as there is no consideration
however the intention, 6 months later to mortgage the property and give the mother 260,000 would be clearly linked to the 'gift'
so the deal was not a gift but a sale albeit at a discounted price
so, in my view, this would be a tax fiddle:0 -
I totally object to your use of the word fraud! There is nothing illegal in this at all, we are trying to do what is best for us and our mother, with the minimum of costs and tax occured! Fraud is a very strong incorrect word to use, I would suggest you check your knowledge on this before calling it fraud as its perfectly legal!
Does anyone have a professional helpful view on this please!
Do we officially have the whole house gifted, or part of it to us, and if so what are the tax implications on both parties0 -
MrConfused wrote: »I totally object to your use of the word fraud! There is nothing illegal in this at all, we are trying to do what is best for us and our mother, with the minimum of costs and tax occured! Fraud is a very strong incorrect word to use, I would suggest you check your knowledge on this before calling it fraud as its perfectly legal!
Does anyone have a professional helpful view on this please!
Do we officially have the whole house gifted, or part of it to us, and if so what are the tax implications on both parties
I have given you my view of the matter which is intended to help you understand the stamp duty implications of what you are doing.
In my view HMRC would see this as tax evasion and not tax avoidance
However if you find such advice offensive then so be it; I will back out.0
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