Owning property my dad lives in

econnin

Thanks everyone.

I will never live at the property. If my dad passes away I will either let it out commercially or sell it. I agree IHT wont be much of a problem as it is unlikely to go over the threshold even with my dad's civi pension.

My mum's side is slightly different as I have half siblings. I am my dad's only child and family, and will inherit everything he has anyway.

My main concern is CGT. I don't want to pay CGT on something that, if was left to me in an estate, would have been within exempt from / not captured by IHT. I guess what I'm saying is that by doing it the way I have and buying the house rather than just inheriting it, I will lose out. It's market value is £105k, if HMRC recognise this then CGT wont be a massive problem. If they argue that the value at purchase was £72k because that's all I got a mortgage for and was the price recorded on the land registry, then I will pay CGT on some of the equity - all of which was a gift from my dad as far as we are concerned. Does this make sense? So I'll be paying CGT on what is essentially an early inheritance?

Interest payment wise, I have another property which I let out commercially which makes a small profit. I wanted to check that I am right in saying that I cannot claim my mortgage interest for my dad's house against this income, as I do not let out my dad's house commercially.

Thanks everyone!

zygurat789

econnin wrote: »

Thanks everyone.

I will never live at the property. If my dad passes away I will either let it out commercially or sell it. I agree IHT wont be much of a problem as it is unlikely to go over the threshold even with my dad's civi pension.

My mum's side is slightly different as I have half siblings. I am my dad's only child and family, and will inherit everything he has anyway.

My main concern is CGT. I don't want to pay CGT on something that, if was left to me in an estate, would have been within exempt from / not captured by IHT. I guess what I'm saying is that by doing it the way I have and buying the house rather than just inheriting it, I will lose out. It's market value is £105k, if HMRC recognise this then CGT wont be a massive problem. If they argue that the value at purchase was £72k because that's all I got a mortgage for and was the price recorded on the land registry, then I will pay CGT on some of the equity - all of which was a gift from my dad as far as we are concerned. Does this make sense? So I'll be paying CGT on what is essentially an early inheritance?

Interest payment wise, I have another property which I let out commercially which makes a small profit. I wanted to check that I am right in saying that I cannot claim my mortgage interest for my dad's house against this income, as I do not let out my dad's house commercially.

Thanks everyone!

Collect all your documentation to prove this NOW. It is much more dificult to do this retrospectively. HMRC employ surveyors and have almost limitless resources, they won't argue for the sake of it, they also will have facts.
Why didn't you just lend the money to your father?

Savvy_Sue

I agree with zygurat: I'd see if you can get a valuation NOW, possibly pay for one to reflect value at the time of acquisition. And keep it in a safe place ... Failing that, look online at similar properties and take screen shots / print copies.

econnin wrote: »

Interest payment wise, I have another property which I let out commercially which makes a small profit. I wanted to check that I am right in saying that I cannot claim my mortgage interest for my dad's house against this income, as I do not let out my dad's house commercially.

Actually I'm not sure that's the case, this isn't at all my area of expertise but I'm sure I read elsewhere that you CAN offset interest (and only the interest), even if the mortgage isn't on the property you're letting.

This does sound like the kind of situation where you'd benefit from proper, ie paid for, advice.

zygurat789

Savvy_Sue wrote: »

I agree with zygurat: I'd see if you can get a valuation NOW, possibly pay for one to reflect value at the time of acquisition. And keep it in a safe place ... Failing that, look online at similar properties and take screen shots / print copies. Actually I'm not sure that's the case, this isn't at all my area of expertise but I'm sure I read elsewhere that you CAN offset interest (and only the interest), even if the mortgage isn't on the property you're letting.

This does sound like the kind of situation where you'd benefit from proper, ie paid for, advice.

Yes that's possible, it would depend on the equity in the other property (not father's house) AFTER the loan had been applied to it.

p00hsticks

econnin wrote: »

My mum's side is slightly different as I have half siblings. I am my dad's only child and family, and will inherit everything he has anyway.

Whilst this may be true if he dies intestate, you would be more correct to say that your fathers estate will be left to whoever whoever he leaves it to in his will - for clarity, I suggest you see that he makes one if he hasn't already.

Dave_the_Ginger_Cat

Savvy_Sue wrote: »

Actually I'm not sure that's the case, this isn't at all my area of expertise but I'm sure I read elsewhere that you CAN offset interest (and only the interest), even if the mortgage isn't on the property you're letting.

This does sound like the kind of situation where you'd benefit from proper, ie paid for, advice.

Agree with Sue - I think you may be able to offset some of the interest, and agree pay a tax accountant - could save you a decent amount over the longer term

holly_hobby

Yes, but only if the amount of mge being offset was directly used to fund the business, of which there shoudl be a clear audit trail.

Its important to note OP that you simply can't offset loan interest, be that a mge or any other type of loan, that hasn't been directly used to fund the business, as this will seriously fall foul of HMRC regs and will be rejected.

To that end, it will all depend on whether HMRC, given that you didn't pch the property as a BTL (but essentially to provide for a dependant), and to which there is no rent or consideration being exchanged for Dads tenancy, to accept the property does indeed actually form part of your business (as oppossed to it just being a 2nd property you own and simply let Dad live in) - to that end it may be worth having a least a peppercorn rent paid by him (with full records etc) for any HMRC inspection to satisfy the consideration element - you adviser will guide.

As suggested, you need to independently top and tail all comment within the thread with yor own tax practitioner.

Hope this helps

Holly x