Buying house off parents

Linton

Suggest you talk to a solicitor/tax accountant to get everything sorted out on a proper legal basis. The combined views of the forum suggest things are seriously amiss at the moment but we, or most of us, are amateurs.

Guest101

holib22 wrote: »

So am I understanding this correctly then, if they bought the house for 70k on the transfer of ownership when mortgage is paid if the house is worth 100k they will pay capital gains tax on the 30k??

A formal agreement is what we currently need to sort regarding the £20k as we're not sure how to go about that so as it's not seen as rent. Any suggestions??

Don't really understand the tax side of things if I'm honest. It was always just seen as my home as I lived with my mom if that makes sense.

For 10 years, your parents should've been paying tax on your payments, they haven't.


You didn't live with your mum, and presumably you're not a child (ie under 18).

Pixie5740

Not seen as rent by whom? Just because you and your parents do not see the monthly payments you make as rent does not mean that Her Majesty's Revenue and Customs view things the same way. Your parents should have been declaring the rental income every tax year. If they wanted to set up some other arrangement they should have sought professional advice at the time to find out if it was at all possible. In fact it would probably be prudent if they sought professional advice now.

In answer to your question about Capital Gains Tax, yes if the property has increased in value by £30k between the time your parents bought the property and then disposed of the property it will be subject to Capital Gains Tax. However, everyone gets an annual CGT allowance which is £11,300 this tax year. If your parents jointly own the property that's £11,300 each and as the property was at some point their main home they will be entitled to some Private Residence Relief.

G_M

1) Your payments have been either

* rent, which your parents have been using to pay off their mortgage, and on which they should have ben paying income tax (or at least declaring it along with any allowances), or

* some kind of down-payment towards purchase - though without a contract of sale or other document it's hard to see how HMRC could be pursuaded of this

2) Capital Gains Tax will be due on sale or transfer as your parents will be disposing of an asset that is not their primary residence.

3) but to answer your question:
to transfer the property from their name to yours, once their is nomortgage) you simpky submit to the Land registry forms:
- TR1
- AP1
- ID1

See here:

https://www.gov.uk/government/publications/registered-titles-whole-transfer-tr1

(if here is a mortgage it will only e possible with the lender's consent and by using the lender's solicitor)

holib22

God I feel more confused than ever now

teddysmum

There are at least two difficult possibilities here :


1)If they need care :


Mortgage payments received, even though paid to the lender , have not been declared , so it would appear that the parents bought and own the house (they legally do anyway), so passing (apparently giving) it to you would be deprivation of assets.


2) If the payments are acknowledged ,then a lot of tax is owed, as there is no legal loan,so the income is rent, but only mortgage interest and not capital can be offset against tax.


There is also the situation of CGT on any increase in value and the fact that the house is effectively a rental property, which legally has to satisfy certain requirements.

Guest101

holib22 wrote: »

God I feel more confused than ever now

about what? If you can list specific questions it's easier to clarify

holib22

Basically what my parents need to do from here on or who they should speak to as I know they approached one solicitor who wasn't very helpful.

00ec25

holib22 wrote: »

God I feel more confused than ever now

lets focus on the important things then:

1. DO NOT attempt to DIY this house transfer as your parents have tax related issues which need sorting out before the transfer becomes a matter of public record and is picked up by the HMRC computer and your parents are "asked" to account for themselves.

2. Your parents need an accountant to sort out their Capital Gains Tax position when they "dispose" of the property to you as there will be a gain given they must use market value since they are disposing of it to a connected person (ie you)

3. Your parents need an accountant to sort out their historic income tax position. Depending on how much money they are willing to spend on professional advice there are some options which could be explored around "deferred purchase payments" and "beneficial interest", but such advice will cost them and it may simply be cheaper to pay the tax in the first place rather than try to retrospectively alter the legalities.

Guest101

holib22 wrote: »

Basically what my parents need to do from here on or who they should speak to as I know they approached one solicitor who wasn't very helpful.

Ok for a start, I suspect the solicitor just told them something they didn't want to hear, not that they weren't helpful.


Your parents need


1: An accountant, particularly one who specialises in housing
2: a solicitor to specialises in conveyancing
3: Probably pay a bunch of tax
4: Possible pay a bunch of interest on the mortgage
5: Finalise the sale to you.