Gifting a property versus mortgage

Honeycomb101

Hi all,

This is my first post so apologies if I've stuck it in wrong section.

I'm looking for some advice.

I have lived in a flat owned by my parents for the last 8/9 years.

I was made bankrupt in 2007 and have not been able to get credit since.

I was wondering if they transferred the property into my name I could then get a mortgage against the property (I have no deposit).

I would then pay my parents for the property retrospectively using the funds released.

Technically I would be buying the property from them - not being gifted it.

My parents who have been supporting me consider the 'rent' that I have been paying them as contribution towards the purchase.

They need £65k to pay off their own house which is my main reason for wanting to buy 'my' flat from them.

I want to know if this is both legal, sensible and practical. Also, I am concerned about the timeframe as both parents are in their late '70's and I wanted to avoid where possible CGT or inheritance tax.

Any pointers or advice would be gratefully received.

Thanks

xylophone

Have you been paying your parents rent? Were they declaring it for tax?

If your parents gave you the property which is not their PPR, they would be liable for CGT on the increase in value between the time they bought it and the value at the time of the gift? Depending on the value of their estates, there could be a liability to IHT?

If you manage to get a mortgage for the amount they require, they will still be liable for CGT and the sale at undervalue will count as a gift for IHT purposes?

Your proposal seems fraught with problems?

pyueck

I don't really get what you achieve by your plan beyond creating a cgt bill for your parents for the market value of the property at the time of the transfer (you can't just use the value you paid as it is not an arm lengths transaction).


The only way for them to reduce any IHT is for them to gift you money, however as they still have a mortgage they should pay this off first.


Are they relying on your rental payments to pay their mortgage, if not can you ask them if it is OK for you to stop paying them rent as this money should be income taxable for them, and then on their death will form part of their estate so will be taxed again for IHT.