right to buy & gifting

tjp01357

mother in law has asked us to help her buy her housing association property and only way that seems open to us is to gift the money.

Will she need to pay any tax on the gift at any point?

If she leaves the property to my partner in her will. What are the implications in relation to the right to buy within the first five years and after the first five years?

Does the housing association have claim on repurchase on property if the deeds are passed on to my partner after five years from purchase?

Thanks in advance.

Ozzuk

This is seriously risky. A 'gift' means you have zero claim on the money, its no longer yours and doesn't entitle you to any rights on the property.

You will be doing this because the housing association won't let you buy into the property.

If your mother in law needs care then the property will be sold to fund it - you'll lose your gift. Though technically you've lost that gift the day you hand it over.

There are a large number of other reasons why this isn't a good idea for you or your mother.

Brock_and_Roll

Ozzuk wrote: »

This is seriously risky. A 'gift' means you have zero claim on the money, its no longer yours and doesn't entitle you to any rights on the property.

You will be doing this because the housing association won't let you buy into the property.

If your mother in law needs care then the property will be sold to fund it - you'll lose your gift. Though technically you've lost that gift the day you hand it over.

There are a large number of other reasons why this isn't a good idea for you or your mother.

As it happens there is another post today where EXACTLY this has happened. The money has been "lost" due to the relative going into care.

AnotherJoe

Why does your MIL want to do this ? If she can't afford to purchase can she afford repairs? You could end up with a double whammy of paying for her repairs as well and then she goes into care and you lose it all.
And don't think that if she passes it on to you after some allowed time has elapsed you'll then gain the money, because this woudl be clear deprivation of assets and it could still be used for care.

Cakeguts

This is an extremely bad idea for your mother in law. She doesn't have any money yet she wants to own something that will need money spent on it. Why? At the moment she gets all the repairs paid for by the housing association. There is nothing in this for your mother in law.

If you give her the money you will have lost it for ever. If your mother in law has signed the house over to someone else that someone else will be expected to pay for her care home fees from the sale of mother in law's house. It is much better for her to stay as a tenant.

tjp01357

i'm interested in how much tax if any either of us are liable too? & can she transfer deeds at five year point?

da_rule

You need to be very careful, as Council's and HA's are now getting very switched on to right to buy fraud. If you make an agreement that you will 'gift' her the money and then she is to 'gift' you the property at a later date this will class as a deferred resale agreement. Therefore under the Housing Act the HA can recover the discount that would have been due on the date the agreement was made (rather than the date of sale). If the agreement, which doesn't have to be a formal written contract, it can be an implied agreement, is made before the tenant buys the property then it is treated as having existed on the day of purchase. This means that you will owe the full discount amount.

She cannot transfer the property without the HA's consent for the first 10 years of ownership. The HA may decide to buy it back in this period if she wants to sell it.

If she 'gifts' it to you then this creates additional issues:
1) Deprivation of capital for potential care home fee's
2) If she remains living there and doesn't pay rent, then it could be a gift with reservation of benefit, meaning that the property value will be counted towards her inheritance tax threshold.

You don't pay tax on gifts, however if you die within 7 years of making it the value (factored down each year) will count towards your (the person making the gift) inheritance tax threshold.

Pixie5740

tjp01357 wrote: »

i'm interested in how much tax if any either of us are liable too? & can she transfer deeds at five year point?

To which particular tax are you referring to?

Gift tax? There isn't any in the UK.

SDLT? Your MIL will need to pay it when she purchases the property. I suppose it could be argued that you ought to pay it when the property is transferred over to you since SDLT is based on the consideration and your consideration is the "gift" you will be making your MIL.

CGT? No when your MIL transfers the property to you as it will presumably be her only or main residence. You, potentially when you eventually sell it.

IHT? Maybe.

Some other tax?

Then there is deliberate deprivation of capital to consider if your MIL should require any means tested benefits in the future or care.

shortcrust

Cakeguts wrote: »

This is an extremely bad idea for your mother in law. She doesn't have any money yet she wants to own something that will need money spent on it. Why? At the moment she gets all the repairs paid for by the housing association. There is nothing in this for your mother in law.

If you give her the money you will have lost it for ever. If your mother in law has signed the house over to someone else that someone else will be expected to pay for her care home fees from the sale of mother in law's house. It is much better for her to stay as a tenant.

It doesn't sound like the mother in law's interests are top of the list.:(

AnotherJoe

shortcrust wrote: »

It doesn't sound like the mother in law's interests are top of the list.:(

To be fair to the OP I think it's quite common for well meaning elderly parents people to try and gain some money for their relatives in this sort of way, or evade care home fees. Or as in this case, both.

There are many examples posted here where it's the parent starting this, and in some cases examples where it was done several years ago and now the wheels have come off with parents unable to afford repairs, children ending up paying additional SDLT, missing out on FTB concessions, and in some cases all of these.

Keep_pedalling

tjp01357 wrote: »

i'm interested in how much tax if any either of us are liable too? & can she transfer deeds at five year point?

She could gift her daughter he home but would be very stupid to do so, as that throws away her security, and she could find herself homeless if you ran into financial difficulty devices or her daughter pre-deceased her.

As your MIL would appear to be a long way from having to worry about IHT, you can’t really argue that the transfer would have any purpose other than to ovoid care fees so the LA will treat the give away as deliberate deprivation of assets.