Transferring of property

Icebergggg · 24 August 2015 at 1:37PM

Innys1 wrote: »

Is this transaction a sale or a gift, from a tax perspective? It makes a difference from the perspective of Inheritance Tax.

The fact that the transfer is at less than market value would seem to indicate it is a gift.

It would be structured as a sale. But from a tax perspective I suppose it would be viewed as a gift. It is likely however from inheritance tax, to as I am aware have no implications. As both of my parents are certainly unlikely to die both within 7 years. I also believe the inheritance tax threshold for a couple will be £650k from the next fiscal year onwards?

Innys1 · 24 August 2015 at 1:46PM

Icebergggg wrote: »

It would be structured as a sale. But from a tax perspective I suppose it would be viewed as a gift. It is likely however from inheritance tax, to as I am aware have no implications. As both of my parents are certainly unlikely to die both within 7 years. I also believe the inheritance tax threshold for a couple will be £650k from the next fiscal year onwards?

It is your last sentence that is likely to save you.

If it is deemed a gift from an IHT perspective and your parents had not paid a market rate of rent while living there, it would be deemed a "gift with reservation", i.e. no gift at all - they retained ownership and the 7 year rule then becomes academic.

Fortunately for you the value of the house is well within the current IHT threshold. I think next year it rises. If the house were worth more than £650k, your plan wouldn't work - unless you parents intended to pay rent.

mrginge · 24 August 2015 at 1:47PM

Icebergggg wrote: »

I completely understand this.

No you don't.

The whole point of D of A is that something of value has been given away or sold for less than its actual value. In those cases then of course the benefit doesn't get actually realised.

In this case your parents will have given away 145k of equity to you. Your parents have therefore deprived themselves of that money.

Icebergggg · 24 August 2015 at 1:56PM

mrginge wrote: »

No you don't.

The whole point of D of A is that something of value has been given away or sold for less than its actual value. In those cases then of course the benefit doesn't get actually realised.

In this case your parents will have given away 145k of equity to you. Your parents have therefore deprived themselves of that money.

Ok, more appropriately said - I do not understand if there is any material implications of this outside of the family, i.e., authorities view, later implications in terms of the social system etc.