IHT/CGT/Stamp question

Lovelyjoolz

When you go to a solicitor to convey the house into your name, they will ask you why your mother would just 'give' you the house. And again, when you go back to your solicitor to convey the house into the mortgage providers name in a few years, they will ask you the purpose of the re-mortgage. If someone (bank/solicitor/neighbour) gets suspicious and reports you to HMRC, things could get nasty.

I don't think HMRC would have much of a problem with the gift of the house if it ended there. But when money changes hands later on, it will be perfectly clear that you have done what you have to evade stamp duty. And I do think its evasion, not avoidance. And the penalties for that can be severe.

If it were me, I would always be worrying about what would happen should the HMRC find out. I really think that it would be safer for your sanity to see a good tax specialist and make sure you're avoiding rather than evading.

Another thought - wouldn't your mother be liable to 20% income tax on the payment you make to her later on anyway?

grizzly1911

CLAPTON wrote: »

so, in my view, this would be a tax fiddle:

Agree with you are that but providing it is within the law doesn't make it fraud.

I am sure there are many "rich" people who engineer their inheritances to mitigate tax.

For the OP I think you really need to run your plans through your professional advisors.

Lovelyjoolz

grizzly1911 wrote: »

Agree with you are that but providing it is within the law doesn't make it fraud.

I am sure there are many "rich" people who engineer their inheritances to mitigate tax.

That's just the point. Within the law = tax avoidance, and most people will be 'engineering their inheritance' to do that, but all within HMRC's guidelines.

What CLAPTON and I are concerned about is that what the OP is doing might fall outside of those guidelines and into tax evasion which is illegal and would therefore be considered as fraud.

MrConfused

Ok, so how about if my omther gifts us £225k of the house and we take out a mortgage to 'buy' the £250k worth left from her? is that legal?

presuming we have to pay stamp on the £250k mortgage?
She gets £250k cash, no CGT
IHT is on the £225k she has gifted us?

Exactly same scenario then, just re-jigged with us then having to pay stamp duty on the mortgage I presume?

Lovelyjoolz

I don't think that she would have to 'gift' you any part of the house, she could sell it to you for a reduced price of £250k if she wanted, but you would have to pay stamp duty of 1% on that £250k.

She wouldn't pay or CGT on the £250k because the house is still listed as her primary residence.

MrConfused

yes lived there all the time since 1984

Meeper

MrConfused wrote: »

Ok, so how about if my omther gifts us £225k of the house and we take out a mortgage to 'buy' the £250k worth left from her? is that legal?

presuming we have to pay stamp on the £250k mortgage?
She gets £250k cash, no CGT
IHT is on the £225k she has gifted us?

Exactly same scenario then, just re-jigged with us then having to pay stamp duty on the mortgage I presume?

This would be a much more correct and appropriate way of doing what you want to do, yes.

MrConfused

In that cae what would ne the Stamp Duty position? payable on the mortgage amount or on the value of the house?

Lovelyjoolz

MrConfused wrote: »

In that cae what would ne the Stamp Duty position? payable on the mortgage amount or on the value of the house?

Neither. Stamp duty would be 1% of purchase price.

MrConfused

But is purchase price counted as the mortgage amount of value of property at exchange?

Huge difference on what stamp needs to be paid