Mortgage- adding parents tax implications?

Leiacake

Hi guys,
I'm a noob so be gentle!
So problem as follows, grateful for any knowledge or advice you can share!

Separated from husband and tried to sell house wih no luck as many have found in these times. Have gained permission to let from the mortgage company and am looking into that no worries. Will be taking ex off mortgage but as I am unable to solely support the mortgage ( apparently though in reality I could if rented, the bank aren't happy to allow that) I'd be adding my dad to the mortgage and herein lies the issue.
My dad owns 2 properties which he lets for profit (neither have mortgages) if my dad was added, would he have to pay tax on my house? It is doubted any profit would be made at this point.

If anyone else has been in this situation I'd be massively pleased with any info!!

Thanks in advance ,
Leiacake

wannahouse

he would only have to pay tax on any profit he makes after expenses are taken into account... if there is no profit- theres nothing to tax!

holly_hobby

As this is not Dads primary residence, if Dad is added to the deeds and mge, referred to as a transfer of equity (TOE) - upon sale he will be exposed to CGT on any gain realised (less permitted reliefs/allowances and exemptions), unless he can prove that he received no beneficial ownership of the property (ie - he did not receive any of the sale proceeds, did not contribute to the property, nor receive any rental income - of which I would ensure there is a clear historical audit trail for HMRC purposes).

This is because CGT is actually based on beneficial ownership not legal ownership (although largely they are one and the same).

If the transferred amount of mge, which is referred to as consideration, and assumed as 50% of the os debt (in a situation when its a straight removal and replacement between 2 parties), exceeds nil rate SDLT band of 125k (so an os mge of 250k), Dad will be liable to pay SDLT (stamp duty land tax) on the transfer. - so there may well be some tax payable upon the tsf depending upon what the actual mge circs are.

You should also be aware that as the property will be Dads asset, it will be exposed to any creditors/bankruptcy order etc - to that end you may want to consider as part of the TOE exercise, having the deeds changed from joint tenancy to Tenants In Common - where legal division of ownership can be unequally apportioned. NB - this makes no difference to the mge, and that all mortgagors no matter what they % of legal ownership, remain jointly and severally liable for the mge debt - but it will reduce the amount of legal ownership he holds of the asset i.e you could have it 99/1 or whatever suits, which would restrict any creditor claim to that amount.

Updating of wills (and life assurance/income protection if necessary) at this time is also recommended.

As always nothing takes the place of directly confirming your position with your own conveyencer and financial or mge adviser.

Hope this helps

Holly