Can't work it all out :(

Hellz85

I posted on another board about a property we are trying to buy with a restrictive covenant. As a result of this I have to buy the property with my parents as I can't be the only named owner for the first 3 years.

They gifted me 109k 3 years ago, I have 115k equity from sale of current property and they will contribute another gift of 16k to make up the difference. Property total of 230k. After the 3 years I will become the sole owner of the property. Can anyone help explain how stamp duty and other taxes would work on this? They have a main residence. I would live there. No mortgage required.

Thank you to all who can help

somethingcorporate

The only tax I can think that would be applicable to your sutiuation would be the stamp duty based on the property value.

Hellz85

But would it be a rate based on it being my main residence or would we have more to pay given that it's not my parents main home?

CLAPTON

Hellz85 wrote: »

I posted on another board about a property we are trying to buy with a restrictive covenant. As a result of this I have to buy the property with my parents as I can't be the only named owner for the first 3 years.

They gifted me 109k 3 years ago, I have 115k equity from sale of current property and they will contribute another gift of 16k to make up the difference. Property total of 230k. After the 3 years I will become the sole owner of the property. Can anyone help explain how stamp duty and other taxes would work on this? They have a main residence. I would live there. No mortgage required.

Thank you to all who can help

you have not made the situation very clear

but if your parent transfer ownership of part of the house to you, then that would be a disposal for cgt purposes and so may incur a charge

Hellz85

I'll happily answer any questions if anything needs clarifying

joshsw25

Hi,


I can't see why any CGT would be payable - It is a main residence which you are looking to purchase rather than sell.


Your parents may need to pay further costs on purchasing a second home, especially if you will be providing a rental income to them.


You would inevitably pay CGT on completion (again, if it is your parents second home you would want to complete before April 1st to avoid paying increased Stamp Duty).


Josh

CLAPTON

Hellz85 wrote: »

I'll happily answer any questions if anything needs clarifying

when the house is bought, who will actually own it and in what proportions?

Hellz85

Given that the money is a gift, I would own it. We have to have their names on the house though, so is their a minimum that would have to be 'theirs' for this to happen? Say 1%? Is this even an option?

booksurr

for those who have not read the background...

• OP wants to buy a house in (rural) Devon which has a Section 157 restriction by the council on it requiring a purchaser to have lived in the area for 3 years to prevent it going to second home owners from elsewhere in the UK
• OP does not meet that condition but his parents do, but (crucially) are not going to live in it themselves as they will remain where they already live
• OP is trying to set up the purchase in his parent's name with him as a participant. To date it appears the council will accept this as a method around the S157 condition

Patently therefore:
a) parents must appear on the deeds as the (initial) owners otherwise the whole thing fails. Parents will not live there.
b) OP cannot appear on deeds for at least 3 years but will, in reality, be living in the property as his main home
c) at a point in time parents will transfer "their" ownership over to the OP

OP you need professional expert legal advice

on the face of it...

• your parents ARE liable for CGT (despite what the others have said above) because it is a second home for them on paper.
• the second home SDLT rate would apply as it is a second home when your parents purchase it as they would be the legal owners of it.
• you cannot own it alone, parents must be on the deeds with you but may indeed own only 1% if done on tenants in common basis, but whether that would resurrect the S157 objection is something you need expert advice on

why you need professional legal advice is because, if done correctly using trusts etc, your parents can indeed be the legal owners so meeting the S157 condition, whilst not being the beneficial owners. Therefore completely removing their CGT liability, since you are the only person benefiting from the property as it is your main hose and it is not available to your parents as their (genuine) second home.

Hellz85

Thank you so much! I'm happy to pay for legal advice on this, but who do I go to? My conveyancing solicitor seemed a bit clueless on the matter. It was suggested that I go to citizens advice but I had a bad experience with them in the past. Is a tax adviser the correct option? I really want the house but I want to make sure I minimise all these extra costs where possible.

xylophone

http://www.telegraph.co.uk/finance/property/advice/propertyclinic/7615597/Declarations-of-trust.html

http://www.hmrc.gov.uk/manuals/tsemmanual/tsem9150.htm

You should consult a firm of solicitors with expertise in Trusts and Conveyancing.