Buying mums house for less than other similar houses in area?

dexter122

Just wondered what if it is possible for my mum to sell us her house at a price that is quite a bit cheaper than other houses in the area? My friends relatives did this with them a few years ago and nothing bad happened, they have never been sought by the taxman or any legal people. What is to stop my mum selling us her house for a cheaper price (is it quite rundown and needs a lot of improvement)? Is this legal? Why can she not sell it to us for whatever she feels like as it is is her house which she has paid for in full? What are the technicalities of doing this? If we purchase the house from her at a lower price than other simular houses and she remains in the house? Can anyone pls advise? Thanks!

InMyDreams

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm is a good starting point.

00ec25

in order to provide approriate advice you need to answer 4 questions:
- does she currently live in it as her main residence?
- will she continue to live there as her main residence once you become the owner?
- does she own any other property besides this place?
- will you live in it once you become the owner?

The implications are:
- if it is not her main home then its sale to you will fall under Capital Gains Tax rules, particularly the connected persons rule relating to use of market value not actual sales price

- If it is her home then she can sell it to you for whatever price she wants but the main implication will be IHT. The discount is a "gift" for IHT purposes (7 year rule) or if she continues to live there then the whole property remains subject to IHT at full value

if she needs means tested benefits in the future then selluing it for a discount will fall under the deprivation of assets rule and so could impact on her ability to claim beenfits and /or get a place in a council funded care home

- if you do not live in it then as its owner you will be subject to CGT when you eventually sell it yourself

dexter122

00ec25 wrote: »

in order to provide approriate advice you need to answer 4 questions:
- does she currently live in it as her main residence?
- will she continue to live there as her main residence once you become the owner?
- does she own any other property besides this place?
- will you live in it once you become the owner?

The implications are:
- if it is not her main home then its sale to you will fall under Capital Gains Tax rules, particularly the connected persons rule relating to use of market value not actual sales price

- If it is her home then she can sell it to you for whatever price she wants but the main implication will be IHT. The discount is a "gift" for IHT purposes (7 year rule) or if she continues to live there then the whole property remains subject to IHT at full value

if she needs means tested benefits in the future then selluing it for a discount will fall under the deprivation of assets rule and so could impact on her ability to claim beenfits and /or get a place in a council funded care home

- if you do not live in it then as its owner you will be subject to CGT when you eventually sell it yourself

It is her main home and she will live there until she dies. If we buy it from her or she gives it to us, does that mean that after 7 years it would not be in her estate anymore and not counted towards inheritance tax? I am confused.

Annisele

dexter122 wrote: »

If we buy it from her or she gives it to us, does that mean that after 7 years it would not be in her estate anymore and not counted towards inheritance tax?

No. Unless she pays you a full market rent on the property, it would count as a "gift with reservation" - and it would still form part of her estate for IHT purposes.

What is it that you're wanting to achieve with this plan? You get on the housing ladder/snake? She gets a lump sum? IHT mitigation?