Transfer/sale of land and barn to son.

postiepatman

My father passed away about 19 months ago and my mother now lives alone.
She owns a small holding which has her house, 2 acres of land and a barn which is built more like a bungalow.

My father applied for planning and built the barn for about £40k around 20 years ago as a potential horticultural business, however he fell ill not long after and it was never used. And has lain empty ever since except for storage.

My mother wants to transfer the barn and a proportion of the land to me to convert it into a house.

If the barn and land were on the open market she feels it would sell for around £100k.
My mum’s idea is to sell it to me for £5k, or alternatively gift it to me.

I also have a sister and the idea is that when my mother eventually passes away my sister would inherit a larger proportion of her house to offset the fact I would have the barn.

What is the best way to go about this though as I’m a bit confused about our liabilities for tax etc.

Can someone please give me and my mum an idea of the best way forward and the pitfalls.


And also based on the above figures how much if any would we be liable for.

Mojisola

postiepatman wrote: »

My mother wants to transfer the barn and a proportion of the land to me to convert it into a house.

I also have a sister and the idea is that when my mother eventually passes away my sister would inherit a larger proportion of her house to offset the fact I would have the barn.

Can someone please give me and my mum an idea of the best way forward and the pitfalls.

I know someone who gave one child an early "inheritance" on the understanding that her sister would inherit the house and money when the parents died. The parents lived a long life and spent the last ones in residential care which used up nearly all their money.

One sister happily enjoyed her early start on the housing ladder; the other waited for years and received nothing at the end of it.

whitewing

Should you/she apply for planning permission on the barn first as that seems fundamental to what happens?

agrinnall

I would have to agree with whitewing. Planning permission to build a barn is an entirely different thing to planning permission for a dwelling, so it would seem sensible to ensure that it is possible to convert the barn to a house before worrying about how to transfer ownership.

TheCyclingProgrammer

In short, your mother may be liable to CGT and any gain will be based on the market value, not what you pay. There isn't normally any CGT when you sell your main residence if you've been living there but I'm not sure how it PRR works when selling part of your land and an outbuilding to be honest. Somebody more knowledgable on these matters can chip in here.

You however will have no tax liability as the consideration for the purchase is well under the stamp duty threshold.

System

It's not too late to execute a Deed of Variation to your father's will leaving you the barn directly. Again, you would need specialist advice.

Food for thought here:

http://www.taxationweb.co.uk/forum/changing-from-joint-tenancy-to-tenants-in-common-t15275.html

postiepatman

HI, and thanks for all of the replies. What a minefield this is eh. Thanks Clifford_Pope for this information however, When my father passed away even though in his will he left everything to my mother, the house was only in her name on the deeds. Can this still be done in these circumstances?

booksurr

postiepatman wrote: »

HI, and thanks for all of the replies. What a minefield this is eh. Thanks Clifford_Pope for this information however, When my father passed away even though in his will he left everything to my mother, the house was only in her name on the deeds. Can this still be done in these circumstances?

no, it was not his to leave therefore cannot be subject to a deed of variation since she was its sole owner at the date of father's death

therefore she will be subject to capital gains tax when she disposes of the property to you since, i assume, the total land holding she is disposing of is more than 0.5 hectare and therefore is outside the scope of private residence relief

obviously a barn with planning permission for residential use will have a much higher market value than one without so i disagree that she should obtain planning permission before disposal to you as it will mean she pays much more CGT

postiepatman

Also my mum came across some tax legislation that says you can in effect double up the IHT threshold from 325k to 650k. Is she reading this correctly, When they wrote their wills they wanted to leave everything to each other and if they both died they wanted to leave everything to my sister and I. The house and everything has solely been in my mums name for the past 20 odd years, so can my dads 325k allowance be used when my mum eventually passes away so my sister and I don't have to pay IHT.

System

booksurr wrote: »

no, it was not his to leave therefore cannot be subject to a deed of variation since she has always been its sole owner

I didn't pick that up from the OP - I thought it was the father who built the barn and applied for planning permission?
It all belongs to the mother now, but who was the owner at the time of the father's death?

postiepatman

My father built the barn however, the deeds are in mum's name. This happened this way because my dad was in Civil Engineering and they went through a time in the 80's and 90's when you could become personally liable for accidents on site, so he transferred the property to mum just in case the worst happened.