Transfer of Property to Sibling

hgd7

In what way? We would pay the normal legal fees say 1k max with vat, and avoid the 12k hit I have to take on the new purchase at higher rate Stamp duty. What further tax is there in the future?

Pixie5740

hgd7 wrote: »

In what way? We would pay the normal legal fees say 1k max with vat, and avoid the 12k hit I have to take on the new purchase at higher rate Stamp duty. What further tax is there in the future?

In the future when your sister disposes of half the property to give it back to you then she will incur a CGT bill.

You will incur a SDLT at the higher rate when you purchase back your half of the BTL.

Then, if HMRC notice your blatant attempt to avoid the higher rate of SDLT in the first place you'll get charged the £12k plus fines.

:T

hgd7

Will there be stamp duty to pay when taking it back if she is just gifting it to me in the future?

00ec25

hgd7 wrote: »

Will there be stamp duty to pay when taking it back if she is just gifting it to me in the future?

she will have a CGT liability when she makes the "gift" to you. It will be calculated at the market price of the property since you and she are "connected persons" so special rules apply

whether you will incur SDLT depends on whether she has paid off her (by then sole name) mortgage in full. If not, and she reverses what you are proposing to do now by making her solely liable for the mortgage, then the o/s mortgage is chargeable consideration nothwithstanding the fact she has gifted the property to you for no payment.

in that case, and with the higher rate's SDLT lower threshold, you may indeed face a tax bill if you "take over" her mortgage. I

if she gives you the property for free and you give her nothing at all in return then no SDLT would apply, but she will still have a CGT bill and you'll have paid a CGT bill previously. maths and some guess work on future house prices may inform you if your plan remains valid now, or will cost more in the long run.

hgd7

Can someone help me work out what the costs now and in future will be? I'm so confused now.
Purchased for 295k
Mortgage is 232k
Value now is 340k (lets just assume this remains for ease)
We are joint owners

I want to remove myself and gift to my sister. My new purchase is going through soon.

In future, my sister will give 100% rights to the flat to me - what will the costs be (assuming the above costs remain the same for ease). My new purchase is 600k and we are paying 20k stamp duty, (higher rate would be 38k) I am a higher rate tax payer. Sorry for the questions, but all new to me.

Slithery

As already stated above it will cost you more than the £18k you would save in stamp duty.

You will have SDLT and CGT liabilty when you transfer to your sister, SDLT and CGT liabilty again when she transfers it back to you, and then when HMRC find out what you've done you'll have to pay the £18k SDLT you have avoided + fines as well.

00ec25

hgd7 wrote: »

In future, my sister will give 100% rights to the flat to me -.... I am a higher rate tax payer. Sorry for the questions, but all new to me.

not without paying off her mortgage she won't so where will the money come from to enable her to do that - not from you, because you get the property as a "gift"

AnotherJoe

hgd7 wrote: »

Can someone help me work out what the costs now and in future will be? I'm so confused now.
Purchased for 295k
Mortgage is 232k
Value now is 340k (lets just assume this remains for ease)
We are joint owners

I want to remove myself and gift to my sister. My new purchase is going through soon.

In future, my sister will give 100% rights to the flat to me - what will the costs be (assuming the above costs remain the same for ease). My new purchase is 600k and we are paying 20k stamp duty, (higher rate would be 38k) I am a higher rate tax payer. Sorry for the questions, but all new to me.

You dont really, you wish to evade (eg = illegal) SDLT by pretending that you dont own a second house whilst you pass it between relatives like a game of pass the parcel.

You cannot evade the tax by gifting it and then it being gifted back to you (unless HMRC dont notice it but in these days of connected computers the odds of that are essentially zero)

In the same way you can't evade CGT by pretending you havent sold it, saying instead you've "gifted" it. They already thought of that wheeze. Transfers as "gifts" between connected people count as sales whether its a real gift or a fake one.

hgd7

So thinking about now...

my sister is acquiring a further share in a property which she already parts owns therefore is not liable for the higher rate SDLT - is this right?

the total o/s mortgage is 232K and she is taking this over in full. As such the chargeable consideration for SDLT purposes is 50% of the o/s mortgage = 116k

the standard rate SDLT threshold is 125k, so no, she will not have to pay any SDLT.....what about capital gains? surely not as she is owner from the start?

Pixie5740

hgd7 wrote: »

Can someone help me work out what the costs now and in future will be? I'm so confused now.
Purchased for 295k
Mortgage is 232k
Value now is 340k (lets just assume this remains for ease)
We are joint owners

I want to remove myself and gift to my sister. My new purchase is going through soon.

In future, my sister will give 100% rights to the flat to me - what will the costs be (assuming the above costs remain the same for ease). My new purchase is 600k and we are paying 20k stamp duty, (higher rate would be 38k) I am a higher rate tax payer. Sorry for the questions, but all new to me.

I've already given you a link to the mechanism for calculating CGT....use it. When you buy the property back from your sister you will pay the higher rate of SDLT if the chargeable consideration is greater than £40k.

Higher Rate SDLT

Not that it really matters because as has been said already by myself and others you are not being clever here. These will clearly be linked transactions by linked people attempting to avoid the higher rate of SDLT. You will end up paying the full £38k SDLT and possibly fines too if you go ahead with your DIY tax [STRIKE]avoidance[/STRIKE] evasion plan.