Giving house to my parents to pay them back

ghermosilla3

Hi there,

I am in a slightly unusual situation and I would appreciate some advice. I am interested in buying a property consisting of four flats that need to be cosmetically improved. Buying the place will stretch me and so my father has offered to organise and do all cosmetic improvement to the house. After this is done houses on that road are selling for around the same value as the whole property is currently selling for and so I thought that I would like to give one of the flats to my parents to thank them for their help making them a better standard.
I know that there are loopholes in inheritance laws meaning I could find a way to give it to my *children* but how would it work if I want to give something to my parents? Does the law discriminate?

Thank you so much for the help!!

Pixie5740

What loopholes? If you are referring to giving a gift and then surviving for another 7 years it then you can make a gift to your parents, it doesn't have to be a child.

https://www.gov.uk/inheritance-tax/gifts

AnotherJoe

ghermosilla3 wrote: »

I know that there are loopholes in inheritance laws meaning I could find a way to give it to my *children* but how would it work if I want to give something to my parents? Does the law discriminate?

They arent really "loopholes" unless you think not dying for 7 years is a loophole.

You might want to check out the SDLT position on this property / flats.
If you are buying 4 separate properties you will have at least 3 lots of SDLT at 3% to pay and 4 if you wont be living there. Is it 1 freehold 4 leases? If so I dont know how that works you might only pay it on the freehold.

david_a

What are your parents going to do with it? Rent it out? Sell it? Live in it?

ghermosilla3

Thank you for your replies! As you can see I'm a bit green. I have now asked about the SDLT position and hope for a reply tomorrow. Parents would either rent or sell... I'm guessing depending on which there will be different rules? Thanks again!

AdrianC

ghermosilla3 wrote: »

Parents would either rent or sell... I'm guessing depending on which there will be different rules?

No, not really.

They will have been gifted a property. What they do with it is their own look-out, along with any tax implications from the choice they make. Those implications may include income tax, CGT and IHT.

AnotherJoe

ghermosilla3 wrote: »

Thank you for your replies! As you can see I'm a bit green. I have now asked about the SDLT position and hope for a reply tomorrow. Parents would either rent or sell... I'm guessing depending on which there will be different rules? Thanks again!

If they will sell, you might as well sell and give them the money. Otherwise you needlessly incur extra costs in the legalities of transferring it to them.

Keep_pedalling

There are a couple of tax issues you should be aware of. First off if your refurbishment puts a substantial increase in the value of each flat, then you may have capital gains liability to pay when you give them the flat.

The other issue is your parents estate inheritance liability. If they are already comfortably off and their assets are near or already above IHT limits then it does not make much sense to put more assets into IHT territory.

martindow

I think there could be other issues with your plan apart from tax.

Are you sure four flats are for sale at the cost of a single flat after you have made cosmetic improvements?

Is it up for auction? This could be a guide price to get interest from bidders and it will sell for more. There could be serious problems with the title or structurally that you're not aware of.

On an open market things generally reach their value. This seems to good to be true (and I suspect it probably is).