Capital Gains Tax? Help?!

SpottyDottie

I took out a mortgage with my mother when I first bought my house about 10 years ago. The intention was that she would be on the mortgage (ie. in practice as a guarantor) but not the deeds, however I've realised my mother is also on the deeds so is therefore a joint owner of the property.

This is causing me some concern as I'm hoping to sell and move on in the next year or two. Since I bought house, I have since married. My partner has lived in the house for approx 7/8 years, paying money to me towards bills but has never paid anything directly to the mortgage. Likewise, my mother has never made any payments towards the mortgage and has never lived at the property or paid bills here.

My husband and I would like to look at buying and moving house in the next year or two, however I'm concerned there's a spanner in the works due to the fact that my mother jointly owns my current property in the eyes of the law (even though she's never had any financial interest in the property in practice).

Am I right in thinking a transfer of equity from my mother to myself (or possibly myself and husband) would attract CGT as I suspect? And, if so, how do I speak to to find the best way of resolving the matter - an IFA, tax advisor, someone else? and how do I find a good one?

Any help / advice greatly appreciated, thanks :-)

BitterAndTwisted

You cannot do a transfer of equity as long as there is a mortgage on the property.

If someone is on the mortgage then they are automatically on the deeds. So, she is a co-owner and always has been. If the intention was for her to be a co-owner in place of acting as a guarantor of the mortgage then she will have no problem giving up her "share"once you decide to sell up.

If you are worrying about CGT the property must be worth an absolute mint! Have you consulted the HMRC website for guidance about CGT?

CLAPTON

'normally' such an arrangement would cause a cgt liability for your mother upon either sale or transfer of ownership.

However, it looks like the full beneficial ownership always lay with you so it should be possible to avoid it.

Firstly though, is there in fact a problem:
how much was the property bought for?
and how much is it now worth?

SpottyDottie

Thanks for the response both of you. I have looked on the HMRC website and frankly, I think I'm getting myself confused; several people have given me different interpretations of the tax implications (wether they be CGT or inheritance tax related).

To clarify, I'm looking to do a transfer of equity from my mother to myself for the 50% she legally owns at the same time as moving my mortgage to a better rate with a different provider in the very near future so I don't think the transfer of equity itself will be an issue as my current mortgage will effectively be ended and moved to a different provider.

The property was bought for £110k, and now worth approx £130-140K (based on the sale of similar neighbouring houses recently) with outstanding mortgage of £80k.

Thanks again all for any responses you can give.

CLAPTON

cgt is worked out like this

gain = 140k-110k = 30k
lets say 3k buy/selling costs
so taxable gain would be 27k

so mother's gain would be half so 13.5k
she has cgt allowance of 10,900 so
net taxable gain 2,600 at 18% so tax would be £468

so even if cgt is payable it's not a massive amount

best to speak to your solicitor once you start the transfer process but it's not worth spending a lot on legal advice for only £468 tax.

Kynthia

Does your mother actually own 50% or is she just a 'joint owner'? If there's no trust deed and you're not tenants in common then can't you just remortgage with just your own name? You'd obviously need your mother's consent, but also would there be any CGT implications for your mother if no money changed hands, as there's no gain for her?

Best talk to your solicitor who handled the purchase to ensure the implications if any actions are fully understood.

TrickyDicky101

Kynthia wrote: »

Does your mother actually own 50% or is she just a 'joint owner'? If there's no trust deed and you're not tenants in common then can't you just remortgage with just your own name? You'd obviously need your mother's consent, but also would there be any CGT implications for your mother if no money changed hands, as there's no gain for her?

Best talk to your solicitor who handled the purchase to ensure the implications if any actions are fully understood.

There is a deemed disposal if the mother's interest is removed from the property and this would be at open market value of the property (doesn't matter whether or not any cash changes hands).