Transfer of equity/ownership

MattHerbison

Hi All,

I'm looking for some advice on my current situation...

I own a flat (leasehold) in which my son currently lives, rent free of course. I'd now like to transfer ownership to him - my first question on this is that I'm not sure of the correct term as there seem to be similarities between transfer of 'ownership' and 'equity'.

I've also read in detail about the process itself, involving the TR1 and AP1 forms as well as ID1 for each party involved as neither of us will be represented by a solicitor.

I'm wondering therefore if there is anything I should be aware of during the process/ any repercussions afterwards with tax etc. (as far as I've read on this, as long as we both live 7 years afterwards all will be well)

Many thanks in advance

Keep_pedalling

Be aware that if the value of the flat has increased since you purchased it you could well have capital gains tax to pay on transfer.

00ec25

if you yourself have never lived in the flat as your main/only residence at any point in time then you will be liable to pay Capital Gains Tax on the full gain you have made (less a one off personal allowance of currently £11,300) The gain is the increase in value from the price you paid to buy it to its current market value. This is because in tax law you are a "connected person" and so the gift and gain is based on market value

that is separate to the inheritance tax treatment of the gift, which you have correctly identified is subject to the 7 year rule and to which you are exposed for that 7 year period.

MattHerbison

Keep_pedalling wrote: »

Be aware that if the value of the flat has increased since you purchased it you could well have capital gains tax to pay on transfer.

00ec25 wrote: »

if you yourself have never lived in the flat as your main/only residence at any point in time then you will be liable to pay Capital Gains Tax on the full gain you have made (less a one off personal allowance of currently £11,300) The gain is the increase in value from the price you paid to buy it to its current market value. This is because in tax law you are a "connected person" and so the gift and gain is based on market value

Thanks both, this had slipped my mind.

How exactly is this identified by the land registry? Does someone turn up to estimate market value, as there will be no sale price? Do they just send a letter asking for it to be paid or do you need to chase them yourself?

00ec25

MattHerbison wrote: »

Thanks both, this had slipped my mind.

How exactly is this identified by the land registry? Does someone turn up to estimate market value, as there will be no sale price? Do they just send a letter asking for it to be paid or do you need to chase them yourself?

The land registry will deal with the change of ownership, but the tax is dealt with by HMRC

You are required to notify HMRC of your CGt calculation because we will take as read that the value of the property being disposed of by you is more than £45,200
https://www.gov.uk/capital-gains-tax/work-out-need-to-pay

HMRC will check the value you used against its own records and challenge you if it is not accepted. On that basis it behoves you to use a "sensible" valuation to start with which you have documentary evidence to show where it came from. Where you get that from it your decision:
- average of recent actual sales price of near/identical property within the last x months, sourced from websites etc
- average of estate agent marketing/asking prices which may, or may not, incur a fee for providing it in writing
- formal written valuation undertaken by a (paid for) professional valuer for the purposes of a CGT calculation, not to market it for sale

once you have worked out your CGt calculation, you are allowed to ask HMRC to check it before you submit your tax calculation itself (and therefore nail your flag to the mast and take the consequences!) by sending them a form CG34
https://www.gov.uk/government/publications/sav-post-transaction-valuation-checks-for-capital-gains-cg34

MattHerbison

Okay great!

Anything on the process itself? Myself and my wife are currently listed as owners - is it possible to remove us both and add my son as sole owner in one move? I understand the term 'Transfer of Equity' means that at least one original owner remains?

00ec25

MattHerbison wrote: »

Okay great!

Anything on the process itself? Myself and my wife are currently listed as owners - is it possible to remove us both and add my son as sole owner in one move? I understand the term 'Transfer of Equity' means that at least one original owner remains?

with respect, google it!

the Land Registry website contains detailed guides and "how to fill our forms" videos
https://www.gov.uk/government/organisations/land-registry