gifting a house

cybernurse

I share a house with my friend, who is the house owner. he owns another house which he wishes to gift to me. I will then move into this property on my own. We are aware of his CGT liability. What does he need to do to make the gift and is it necessary to involve a solicitor.

cte1111

Is the house mortgaged? If not, then you need to fill in a transfer form with the Land Registry. You will also need to have your and your friend's identities verified.
https://www.gov.uk/registering-land-or-property-with-land-registry/transfer-ownership-of-your-property

It's quite possible to do this yourselves without a solicitor but you will need an authorised person to check your identity, which can be a solicitor or at a Land Registry information centre. It is usually a minimal fee, if you do use a solicitor for this part only.

cybernurse

Thanks for your quick response. The property is owned outright. My friend has had it valued so presumably we can use that as the figure for calculating the CGT.

xylophone

There may also be IHT implications for your friend's estate.

G_M

xylophone wrote: »

In the event of his death within 7 years, there [STRIKE]may[/STRIKE]would also be IHT implications for your friend's estate.

just to clarify.

teddysmum

You don't need a solicitor to prove identity if you both go to the Land Registry premises in person. (See the website for details).

cybernurse

in terms of IHT implications, does that mean that, if he paid the CGT at the time of transfer then died in under 7 years, assuming his estate was subject to IHT, the full value of the property could attract 40% tax? i.e. HMRC get two nice big bites of the cherry?

gingercordial

cybernurse wrote: »

in terms of IHT implications, does that mean that, if he paid the CGT at the time of transfer then died in under 7 years, assuming his estate was subject to IHT, the full value of the property could attract 40% tax? i.e. HMRC get two nice big bites of the cherry?

No, they shouldn't do.

Are you and your friend in any way related? I know you said "friend" but this is an important point so worth checking! Siblings, parent/child, actually married? It's unusual for someone to just hand over a house for no money unless there's a relationship of some kind.

If you are not connected by blood relation or marriage and this is a true gift with no money changing hands and nothing else of any value changing hands either (ie you aren't taking on a debt of his, or taking out a mortgage on it yourself and paying off his, or anything else?) then his disposal proceeds for CGT are nil and so is probably going to make a capital loss rather than a gain. So no tax to pay. You say he is "aware of his CGT liability" - who told him what that was? He may have been misadvised.

IHT would be in point if he then dies within 7 years, but since there was no CGT to pay this means HMRC aren't getting two bites of the cherry, just the IHT-flavoured one.

For the record there would also be no stamp duty on a true gift with no money/other items of value changing hands.

xylophone

"The OP and friend should read https://www.gov.uk/capital-gains-tax/what-you-pay-it-on

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.


Disposing of an asset includes:

selling it
giving it away as a gift, or transferring it to someone else

There are special rules for Capital Gains Tax on gifts or assets you dispose of to:

your spouse or civil partner
charity

The normal rules apply for gifts to others."

xylophone

Re IHT and PETS
http://www.macintyrehudson.co.uk/article/potentially-exempt-transfers

cybernurse

Thank you to all who have contributed. For the information of gingercordial, it is a true gift with no strings attached and no relationship involved other than a wonderful friendship. No mortgage/debt etc for either of us. We researched the CGT question ourselves and decided he needed to pay to HMRC 18% of the difference between his purchase price (bought in 1993) and the current value of the property. Your comments indicate that he has no CGT to pay yet Xylophone seems to be stating that there IS a CGT liability in our circumstances?