Transferring ownership of house? (no mortgage)

kdub_2

Hoping someone can help me as im a bit boggled by what iv read so far. To cut it short, my father owns a house that he was previously renting out. It was to be my inheritance yet iv moved into it now so we are just going to transfer ownership to myself now instead. The house has no mortgage and i was just wondering if i can do this myself without a solicitor? as the first one i rang quoted me £300. any help would be much appreciated, i understand i need to fill in a TR1 form but other than that not sure

holly_hobby

http://www.landregistry.gov.uk/public/faqs/how-do-i-transfer-my-registered-landproperty - explains the process

There is also a LR reg whom travels the board, so he make pick this up.

There will be no SDLT due, as there is no consideration or existing mortgage in relation to the transfer of ownership.

However, depending upon whether and when your dad lived in the house, there are very important CGT implications (regardless of the fact that there will be no monetary/consideration exchange for ownership).

Which as a connected transfer (parent to issue) will be based on any gain between Dad's acquisition price, compared to todays market value (less annual unused CGT exemption for 2013/14, and any other reliefs/ allowances his residency and incurred capital costs may qualify him for).

The donation of the property, and if Dad retains no further financial interest or benefit from it, will also for IHT purposes be defined as a PET, which means that it will only be classed as exempt from inclusion in the valuation of his estate on death, IF he survives 7 yrs post donation - if not there may be further tax issues in relation to the transfer, if the combined net estate exceeds IHT exemption threshold.

If Dad's estate is likely to exceed his available nil rate band (currently for 2013/14 £325k pp, or upto 650k if there is additional full unused deceased spousal transfer available) - you may want to examine Dads estate, and discuss this exercise plus IHT mitigation as a whole, with his/your IFA/tax practioner - its very important you consider the tax implications before you dive in with this.

Hope this helps

Holly

loubel

It is possible to transfer a property without a solicitor. The Land Registry website has various guides on the practicalities of how to do it but obviously cannot give legal advice on the transaction or its implications.

Your father would be best advised to instruct a solicitor to ensure that the paperwork is done correctly and to ensure he is given advice on the effect of the transfer on him. You might want a solicitor to advise you also on the paperwork, the legal title or if you want to carry out any searches on the property.

kdub_2

My dads only young and in good health so (hopefully!) he'll be around much longer than 7 years. His total assets arent near 325k. He'll not be receiving any financial benefit from transferring it to me. He has also never lived in the property. I actually had that link open been reading through it and not sure of the whole procedure. Am i right in thinking i can do this without a conveyancer? bit expensive from the quotes im getting

holly_hobby

Yes, as its unencumbered, you can do it without a conveyencer - if you're confident, and having read the following link I've also provided .... http://www.landregistry.gov.uk/public/forms/completing-form-tr1 , and linked pages particular to your circs ie TP1, AP1/FR1 & SDLT1, understand your obligations what, how and when you do various stages.

If you remain unclear of nervous of the procedure, engaging a sol will ensure all the T's are croseed i's are dotted where and when they should be. (and may be money well spent I think).

CGT remains an issue regardless of his age, if there is any monetary exchnage, or the value of his estate ...

If he's never lived in the property the "gain" will be the simple difference between the market value at point of transfer to you and the original pch price, less his annual unused CGT allowance £10,900 for 2013/14, any documented/recorded improvement costs (not general maintenance) and acquisition/disposal costs (ie any solicitor fees etc).

He has to declare the CGT exposure via his annual CGT submission on the relevant pages - if he's a basic rate tax payer his net gain will be taxed at 18% and if higher rate at 28% instead (personal allowance may not be applied to any CGT tax liability).


Hope this helps

H x

kdub_2

how would i go about finding out if CGT would be an issue? the house was purchased long long ago so has obviously risen in value a lot more than was purchased for.

holly_hobby

CGT WILL be an issue for Dad if he gifts this to you in his lifetime (or even if he sells to a 3rd party) .... which is why, if his total estate remains under IHT threshold, it may be better you just inheriting on his passing, as when you sell CGT will be based on the value a the time you inherit it, not when Dad purchased it.

Here's a link to HMRC, re CGT and connected persons, http://www.hmrc.gov.uk/cgt/intro/glossary.htm#connected_person

and basic info on CGT calcs etc

http://www.hmrc.gov.uk/cgt/property/calc-cgt.htm

http://www.hmrc.gov.uk/cgt/property/reliefs.htm

Subsequent CGT reliefs may be gained IF Dad moves into the house as his primary dwelling (whereas he will attract primary residence relief), but this won't take account of any prior non-residency period, which will always be exposed to CGT.

I really think a sit down and re-think/discussion with Dad and a tax adviser may be your next step ..... but you have the bones of what the transfer exercise will entail and incur in response to your original enquiry.

Hope this helps

Holly x

kdub_2

called HM revenue apparently my dad would be liable to pay £28,000 just for giving me the property. Disgraceful to be honest not sure how anyone can justify such costs

Land_Registry

The forms and guidance on how to transfer a registered property in England & Wales are, as you already appreciate, available via the link holly hobby has referred to

You would need to complete forms AP1, TR1 and ID1s for both you and your father and lodge them together with the registration fee.

As holly hobby rightly points out there are wider implications to be considered and whilst completing the forms (there are some online notes to to help with this as well) can be straightforward this does not mean that there is no need to get wider legal or financial advice. So not too much I can add here.

The information provided by HMRC reaffirms that as well of course.

If you do proceed with the Transfer and need any help in completing the forms or making the application then do Contact Us - for anything else then professional advice is always recommended.

holly_hobby

kdub wrote: »

called HM revenue apparently my dad would be liable to pay £28,000 just for giving me the property. Disgraceful to be honest not sure how anyone can justify such costs

I assume following your earlier post, you have now obtained from Dad his acquisition, other associated costs and the market value of the property, and that HMRC worked out his liability for you in a phone call ..... that was helpful of them !

Anyhoo, its justified under tax legislation, because this hasn't acted as Dad's primary residence, in fact he purchased and has used it as a business from outset, which is where the CGT issues have originated, of which sadly I'm afraid, there is now no avoiding the exposure under this period .....

If Dad sourcing the CGT settlement monies is an issue, the only suggestion I can give is that you purchase it from Dad for the 28k or whatever the CGT liability equates to, which won't affect the CGT apsect (as its still a sale below market value to a connected person), and still won't trigger SDLT given the consideration (pch price) is still less than 125k - so still only 1 tax liability there, but at least Dad will have the readies to pay it.

Whether you can utilise your own savings for this, or intend to source a mortgage, subject of course to status/the property being suitable for mge purposes and sourcing a lender that accepts a concessionary/family discounted purchase (so that no further deposit is reqd), is really the domain of a whole of market broker,whom will assist and support throughout the application process and beyond if reqd.

So yes there are issues you weren't aware of, but there are also possible solutions, the rest is up to you/Dad and your engaged advisers, to take this where you want it to go.

Hope this helps

Holly x