Purchasing 50% of parents home.

LateStarter

Sorry I've missed something:

• your parents will still own half the house?
• they will pay you an inflated amount to "rent a room" in the house they co-own?

In what possible way is this a good idea?

davidmcn

LateStarter wrote: »

Sorry I've missed something:

• your parents will still own half the house?
• they will pay you an inflated amount to "rent a room" in the house they co-own?

And if the house is (supposedly) the OP's main residence, why isn't the OP also paying rent to their parents for occupying the parents' 50%?

D94ccm

Thanks all,

Some interesting points.
Family issues not too much of an issue as, relationship wise, it is all very good. Care issue and deprivation of assets is not something I had thought about so thank you for brining it up.

In esence the return on the £150,000 is what my parents would transfer to me as 'lodgings'. Because of the RAR threshold, it would mean that I would get £7,500 free of tax as opposed to the £2,000 that is the current dividend allowance. My parents don't lose out on anything as they still get to live in the property and the lodging that I am paid comes in the form of passive income from the £150,000. Technically they give up 50% of the house; however, there is no actual change from the living arrangements or their living expenses.

Further Questions:
What is the official threshold for what makes a property your 'main address'? Is there a certain number of days that must be spent at an address? How can people prove this?

Thanks again.

AdrianC

D94ccm wrote: »

In esence the return on the £150,000 is what my parents would transfer to me as 'lodgings'. Because of the RAR threshold, it would mean that I would get £7,500 free of tax as opposed to the £2,000 that is the current dividend allowance.

Except this doesn't fall under RaR.


So you're working on 5% "rent". Which means if they're investing the £150k you're paying them, then they need to get back about 6.7% to be ahead on this deal, if they're standard-rate tax payers.


And, if you live there, will you also be paying them £7,500 on their half of the property...?

My parents don't lose out on anything as they still get to live in the property and the lodging that I am paid comes in the form of passive income from the £150,000.

Yes, they need to invest the £150k to earn the "rent" they pay you. So why can't you invest it yourself?

Technically they give up 50% of the house

There is no "technically" about it.

however, there is no actual change from the living arrangements or their living expenses.

...except for the "rent" they now need to pay you every month.

parkrunner

What are the advantages for your parents in this? I can only see the opposite.

D94ccm

Adrian:

6.7% only if they are basic rate tax payers. They are not.

Am I legally obliged to pay the rent too? I was not aware of that.

If I invest it myself, I can only get £2,000 tax free. Through RaR I can get £7,500.

The rent they pay me comes simply from the £150,000 I transferred to them. So it is technically at no cost to them.

Parkrunner:
Agreed, there are mostly advantages for me, but I'm not convinced that there are many negatives for my parents?

Cakeguts

The negatives of which there are many are all your for your parents. You are working on the basis that you are entitled to have money from your parent's house when they die. You are not entitled to this. This is their money to spend as they wish. They worked to buy the house. If they need care at the end of their lives this iss where their money comes from to pay for it. Their money not yours.

LateStarter

You've also missed the fact that at some time in the future, your parents will have 'paid' you £150,000 in rent and will own half a house. Will you continue to charge them rent then or 'graciously' allow them to live rent-free in their own house?


And if they need care or want to downsize?

00ec25

D94ccm wrote: »

Am I legally obliged to pay the rent too? I was not aware of that.

your parents are entitled to charge you for the use of their space just the same as you think you are "entitled" to charge them

since you are non resident, you cannot claim RAR, as has been said several times. And no, it is not simply a question of how many days do you "live" there
The test is wholly subjective and is based on extensive case law examining what is meant by "residence"

davidmcn

D94ccm wrote: »

Am I legally obliged to pay the rent too? I was not aware of that.

You're not legally obliged to, but if it made any sort of sense for your parents to pay you rent in order to occupy a property which you all jointly own, why wouldn't the converse apply? The whole thing looks like a totally artificial construct in order to avoid/evade tax. I don't know whether it even works, but I wouldn't be surprised if it didn't.