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Declaration of Trust
Comments
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Your son lends you 9% of the purchase price against a legal agreement that he will be paid 9% of the proceeds when the property is sold?
Presumably any increase in value over the purchase price would be taxed as a capital gain (for your son - you have the PPR exemption).
Take professional advice.0 -
Thankyou. I have asked my conveyancing solicitor but the solicitor has advised my soon seek the advice from his own solicitor but we are concerned this may delay my purchase as my son lives in Scotland.
My son has queried if we proceed with a DOT will he be liable for CGT on the whole amount or just the amount he gains should the property increase in value, i.e. if he puts in 20 k and the increased value of the house means his return is, say, 23k.0 -
a DOT will make him liable for the gain (only) on whatever terms the DOT establish as his beneficial ownership share, eg:needamemory wrote: »Thankyou. I have asked my conveyancing solicitor but the solicitor has advised my soon seek the advice from his own solicitor but we are concerned this may delay my purchase as my son lives in Scotland.
My son has queried if we proceed with a DOT will he be liable for CGT on the whole amount or just the amount he gains should the property increase in value, i.e. if he puts in 20 k and the increased value of the house means his return is, say, 23k.
a) DOT = 9% of property value at point of purchase = no gain >no CGT
b) DOT = 9% at point of sale = CGT on gain in value from market value at point of purchase(/his investment) to eventual selling price as, in tax terms , you are connected persons so must use open market value not a value you agree between yourselves. Shouldn't be an issue given you are purchasing it on the market anyway. CGT is at 18% and/or 28% depending on his total "income" in year of sale.
(BTW solicitors are prevented by their own professional rules from advising parties on both sides of a deal, they can only advise one side, obviously many Scottish solicitors will (should) not advise on matters of English law)0 -
would not a small mortgage be a better option?0
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