Capital Gains Tax

bill1980

Hi, just wondering if I could get some advice on the following. Tried various links and other websites but just cant seem to get it clear in my head.

Circumstances
Parents have just bought a house for 140k. They want to sign it over to me as I have helped them out financially to clear debt. No IHT/Anticipated care home/Bankruptcy issues. They will want to live in the property. Gift With Reservation. Initially their house was going to be split between myself and 2 siblings but now it will all be gifted to me due to the financial support I have given them.

Just wondering what the CGT considerations will be if I was to outlive them and sell it on.

I presume the basic principle is that I would pay CGT on any profit made after the point of gifting. For example Value at point of gifting is 140k I sell it for 200k in the future and I pay CGT on the 60k profit.

The slightly grey area is that

1) I took out a large loan to clear my parents debts to help them move/survive and I will naturally have interest to pay on this.
Would these loans, interest and other financial support be taken into consideration when they talk about profits made if I were to sell it in the future? In 10 years time the house prices may go up but I still wont be making profit due to the money I put in to get the house gifted to me.

2) Secondly the house they want to gift me is next door (Semi). Would it affect future CGT payments if I were to technically live in both premises. I.E sleep in in one of there rooms on there side and live normally in the other? Suppose I trying to get a definition of what the tax office would class as "living" at a premises.
Or I guess another thing we may do is turn it into one big property so it will be classed as one main residence and not a second home.

I just want to make sure i'm doing the right thing but not pay things that don't necessarily need to be paid.

Thanks in anticipation

AnotherJoe

I fail to see the benefit to any of you from them gifting it to you.
Its all downside.
What do you or they imagine the upside is?
Why dont they just leave it to you in their will thus omitting all the CGT and IHT issues ?
And no you cant wiggle your way round the rules by attempting to make both premises your "main" residence.
If you / them would like you to recover the money you gave them to help buy it in the event of it being sold for care home fees, and to minimise IHT (though at these numbers that wont be an issue), put a charge on the property for that amount and write up a short signed dated witnessed note documenting your loan to them for that amount

xylophone

Your parents have bought this property outright with the help of money you borrowed and passed on to them?

You could simply take a first charge on the property for the amount of the loan, so that in the event the house had to be sold for care, your loan would be repaid before the proceeds could be so used.

bill1980

OK thanks for the advice.

I just wanted that clarification on the CGT and consider options before jumping in. It looks like the CGT is going to be a factor no matter what so they can pass it to us in their will instead of gifting it.

Without going into granular detail this potential move is going to benefit all sides. Just want to do it in the in the way where we can save the most money.

AnotherJoe

bill1980 wrote: »

OK thanks for the advice.

I just wanted that clarification on the CGT and consider options before jumping in. It looks like the CGT is going to be a factor no matter what so they can pass it to us in their will instead of gifting it.

Without going into granular detail this potential move is going to benefit all sides. Just want to do it in the in the way where we can save the most money.

What move? In para 1 you seem to say they will leave it in will instead of gifting, para 2 you talk bout "this potential move" - what move?
As I said, I cant think of a single benefit and many downsides to them putting you on the LR entry now.

Mojisola

xylophone wrote: »

Your parents have bought this property outright with the help of money you borrowed and passed on to them?

You could simply take a first charge on the property for the amount of the loan, so that in the event the house had to be sold for care, your loan would be repaid before the proceeds could be so used.

bill1980 wrote: »

I just wanted that clarification on the CGT and consider options before jumping in. It looks like the CGT is going to be a factor no matter what so they can pass it to us in their will instead of gifting it.

Without going into granular detail this potential move is going to benefit all sides. Just want to do it in the in the way where we can save the most money.

Then follow the good advice from xylophone - that way you can be assured of getting back the money you lent them.

If they want to leave the house to you alone in their will, you will also get the rest of the property's value as long as it's not needed for care home fees.

bill1980

Thanks again. It helped clarify and confirm a few things for me :beer: