Buying house from parent

Pixie5740

CGT will be based on the market value, so £350k.

AnotherJoe

Lenw wrote: »

Will the CGT be based on £350k or the £210k? The sale will show as £210k?
To be clear (as I tried to keep simple), my mum wont be left out of pocket as I’ll be covering any costs incurred as a result of the sale.
Thanks for all your help guys

That could worse case be tens of thousands of pounds ?

Lenw

Thanks for all your advice. I have arranged an appointment with a mortgage broker tomorrow but would have been useful to hear from anyone who has experienced something similar.

Essentially I!!!8217;m trying to reduce my tax liability by the sale being £210k, my mum bought the property 5 years ago for £220k so with a £10k defecit expecting the liability to be £0.

Also, by purchasing the property at £210k was hoping to reduce the Stamp Duty liability significantly £10k less) than if it was purchased for £350k.

If anyone has experience of doing something similar would be great to hear.

Cheers

noh

Because the transaction between your mother and yourself is "not at arms length" the market value ie £350k will be the used as the disposal consideration rather than the actual disposal proceeds of £210k.
On the above figures your mother will be liable for CGT on a gain of £130k if her acquisition cost was £220k

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14540

https://www.taxcalc.com/kb/index.php?View=entry&EntryID=2252

Keep_pedalling

noh wrote: »

Because the transaction between your mother and yourself is "not at arms length" the market value ie £350k will be the used as the disposal consideration rather than the actual disposal proceeds of £210k.
On the above figures your mother will be liable for CGT on a gain of £130k if her acquisition cost was £220k

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14540

Less the £10,300 annual allowance, so a taxable gain of £118,700 so she would have to find up to £33,000 to pay in the following tax year.

noh

Keep_pedalling wrote: »

Less the £10,300 annual allowance, so a taxable gain of £118,700 so she would have to find up to £33,000 to pay in the following tax year.

Yes less the allowance £11300 this tax year. £11700 in 2018/19

AnotherJoe

Lenw wrote: »

Thanks for all your advice. I have arranged an appointment with a mortgage broker tomorrow but would have been useful to hear from anyone who has experienced something similar.

Essentially I'm trying to reduce my tax liability by the sale being £210k, my mum bought the property 5 years ago for £220k so with a £10k defecit expecting the liability to be £0.

Also, by purchasing the property at £210k was hoping to reduce the Stamp Duty liability significantly £10k less) than if it was purchased for £350k.

If anyone has experience of doing something similar would be great to hear.

Cheers

If it was that simple to evade tax everyone would be doing it !

When you do this you'll initially seem to get away with it. But as they pair up records and realise it's a connected transaction they'll come after you and your mum for the tax, for fraud, and no doubt some additional financial penalties as well.

As far as HMRC is concerned the house will have been sold for £350k and the capital gains tax your mum pays* needs to be based on that

* or you reimburse her for ?

silvercar

Did she ever live in the property as her principle residence? If so that would reduce the CGT liability.