Which is more tax efficient - giving or selling property to my son (for an expat)

Farrella

Hello. I bought a London flat for my son 8 years ago for £250,000, and he has been living in it for the past 8 years. I would now like to give him the property. The market value of the flat is now around £450,000, and it has around £35,000 remaining in its mortgage (less than 10% of value).

What is the most tax efficient way of giving it to him? Would it be cheaper to sell it to him?

Thanks in advance!

ps: My son is a UK resident but I'm an expat.

Dr_Teeth

As your son is a connected person, it doesn't matter whether you give it to him or sell it to him, you'll be deemed to have disposed of it for the market value.

Your gain will be £200,000 (less any incidental costs of buying & selling, and enhancement expenditure on the property). You haven't lived there so won't get any private residence relief or lettings relief.

When did you leave the UK?

Nicola_Ed

Hi - some non residents are not liable to capital gains tax on assets disposed of in the UK so the sale to your son may be exempt from capital gains tax. Follow the link for more details. This generous exemption is expected to be withdrawn on 5 April 2015. You should also check the tax rules that apply in the country you live in.


http://www.hmrc.gov.uk/nonresidents/faq/faqcapital-gains-tax.shtml

Farrella

I left over 20 years ago!

Yes I'm aware of the change in capital gains tax relief for non-uk residents/expats next year, which is why I'm thinking of giving or selling the property to my son now.

Still confused over whether it is better to sell it to him or give it to him....

Savvy_Sue

If you need the money, and he can afford it, sell it to him.

If you don't, give it to him unless you feel that you 'need' to sell it so as not to make him feel that he's entitled.

From your tax point of view, it doesn't sound as if it would make any difference.

From your son's point of view, it doesn't make any difference.

Farrella

Ah this is not about my money vs his money, it's only about minimising tax while transferring the property into his name....he's the one who has been paying the mortgage anyway.

What would the best procedure be for giving him the property?

booksurr

your best action is to give the property to son at no cost .

Son will not have to pay any stamp duty since it is a gift where no money changes hands and therefore there is no "chargeable consideration" on which stamp duty can be charged

as for the process of transferring to your son then I think your biggest problem will be that you are abroad. the Land Registry requires that the person making any transfer has to be identity checked.

If you use a solicitor to do the conveyancing (which should cost no more than a few £100 otherwise you are being ripped off) then the solicitor is required to declare to the Land registry that they have checked your identity and will need to send a photo of you so will probably need to physically meet you.

If you do the Land Registry transfer documents yourself (I think you need forms: TR1, AP1, and ID1 http://www.landregistry.gov.uk/professional/forms) then note that ID 1 must be signed by a solicitor/conveyancer or signed by LR staff themselves when you physically go to one of the LR offices. As you are not in the UK that may be rather difficult? You had best seek advice from the LR on what to do, they are very helpful when you contact them http://www.landregistry.gov.uk/contact-us

(make sure you use the correct website (.gov.uk not anything else) as there are a number of "land registry" websites which will charge you for services and documents you can get for free from the real Land registry website !!!!!)

zygurat789

All this is subject to the tax laws within whose jurisdiction you reside when any transfer, however made, is made.

Farrella

Thanks for the advice.

How would this affect my son's capital gains tax situation if he decides to sell the flat in a few years? It will be his main residence for another year or two but I expect him to move abroad after that. I paid £250k for it 8 years ago but it's been valued by an estate agent at £500,000 in the beginning of June this year.

Thanks again for the invaluable help.

Dr_Teeth

Your son will be deemed to have acquired the property for market value at the date of transfer. If he then sells it he will be taxable on any gain accrued since then (subject to private residence relief etc)

Farrella

And how would the "market value" be determined? Would a valuation by an estate agent be useful?