Deeds and stamp duty

markelanduk

Mojisola wrote: »

How can you rent it from them when you own it?

As you live in the property, CGT isn't an issue.

Our name is on the deed but the property is, from a moral perspective I guess you'd say, theirs. We can't sell it unless they say so. The only reason my siblings and I are on the deed is that they wanted to avoid us incurring inheritance tax as and when it's sold.

xylophone

Our name is on the deed but the property is, from a moral perspective I guess you'd say, theirs.

I think that you are going to have to check on the situation regarding legal/beneficial ownership of this property.

Check with a solicitor.

It appears that your parents made an outright gift of this property to you and your siblings - if this is the case, then you and your siblings are the legal and beneficial owners and I am at a complete loss as to why you should be paying rent to your parents.

Or are you saying that you and your siblings are the legal owners but your parents are still the beneficial owners?

If so, I cannot see how this could possibly have saved on IHT.

SDLT_Geek

markelanduk wrote: »

Our name is on the deed but the property is, from a moral perspective I guess you'd say, theirs. We can't sell it unless they say so. The only reason my siblings and I are on the deed is that they wanted to avoid us incurring inheritance tax as and when it's sold.

As you say you are renting the property from your parents, it might be that the ownership is different from what you assume. Perhaps your parents set up an interest in possession trust whereby you and your siblings are the trustees and they have the right to the income for the property for life with you and your siblings being entitled on their death. That might well not be consistent with your understanding that it was done for inheritance tax reasons, though it might well smooth the inheritance process.

If there is such an interest in possession trust then you should not suffer the 3% extra SDLT on your purchase. Whether you qualify for first time buyers' relief then depends on whether HMRC are correct in their guidance here: https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers-guidance-note see chapter 3 and Q16 in Chapter 8. There is a suggestion at 3.3 (see example 3.3.2) in the detailed paper linked from here https://www.blakemorgan.co.uk/sdlt-first-time-buyers-relief/ that HMRC are not right on that point.

SDLT_Geek

xylophone wrote: »

I think that you are going to have to check on the situation regarding legal/beneficial ownership of this property.

Check with a solicitor.

It appears that your parents made an outright gift of this property to you and your siblings - if this is the case, then you and your siblings are the legal and beneficial owners and I am at a complete loss as to why you should be paying rent to your parents.

Or are you saying that you and your siblings are the legal owners but your parents are still the beneficial owners?

If so, I cannot see how this could possibly have saved on IHT.

Good points. I have posted above about the possibility of a life interest trust having been set up, this seems unlikely given what OP has said about the arrangements, but it would have a different set of consequences for OP's proposed purchase.

00ec25

xylophone wrote: »

It appears that your parents made an outright gift of this property to you and your siblings - if this is the case, then you and your siblings are the legal and beneficial owners and I am at a complete loss as to why you should be paying rent to your parents.

Or are you saying that you and your siblings are the legal owners but your parents are still the beneficial owners?

If so, I cannot see how this could possibly have saved on IHT.

agree with every point made.

your position is far from clear and unlikely to cover what you want to do re SDLT

xylophone

Even if there is no trust, if the parents have gifted this property but retain the right to benefit from rental income/and or to occupy the property at their convenience, then surely this is a gift with reservation of benefit and therefore ineffective for IHT purposes?

It seems to me that the OP does need advice from a solicitor.

markelanduk

Thanks again all for your input!

Just to clarify a fairly confusing situation:

*My grandparent died and left the property to my parents.
*I have been renting the property from my parents from the past few years.
*To avoid seeing myself and my siblings pay a large inheritance tax fee in the future, my parents sought a solicitor's advice and decided to transfer ownership of the property to myself and my two siblings.
*Although the property is in my and my siblings' name, we all appreciate that it's really my parents' inheritance for now. They are receiving rent from me and when I buy a property shortly, they will continue to rent it out. They may well decide to move into it one day.
*When my parents die, my siblings and I can then decide to sell the property and split it three ways. Until then, we all accept that any income generated from its rental should go to my parents.

Back to the crux though and the fact that I'm on the land registry for one property already means that I'll be stung with two lots of stamp duty when I buy another. I'm hoping it will be a simple case of arranging for a solicitor to remove my name from the land registry and placing a charge against it for a third of the property as and when it's sold/when my parents die.

00ec25

markelanduk wrote: »

*Although the property is in my and my siblings' name, we all appreciate that it's really my parents' inheritance for now. They are receiving rent from me and when I buy a property shortly, they will continue to rent it out. They may well decide to move into it one day.
*When my parents die, my siblings and I can then decide to sell the property and split it three ways. Until then, we all accept that any income generated from its rental should go to my parents.
.

I suggest your parents consult a second solicitor, one who is experienced in inheritance tax because what you describe categorically confirms parents have retained the beneficial ownership and therefore remain liable for capital gains tax since they, and they alone, continue to benefit from it, not its legal owners.

as such that also may have unravelled their IHT planning....
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm04441

markelanduk wrote: »

Back to the crux though and the fact that I'm on the land registry for one property already means that I'll be stung with two lots of stamp duty when I buy another. I'm hoping it will be a simple case of arranging for a solicitor to remove my name from the land registry and placing a charge against it for a third of the property as and when it's sold/when my parents die.

no, as already mentioned, if you retain beneficial ownership you will have to pay higher rate SDLT, simples

https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09815

markelanduk

So would you suggest that I come off the deed and not have a charge against the property and trust that my siblings provide me with a third of the value of the property as and when it's sold?

markelanduk

Just to add that I fully appreciate that I'll need to pay stamp duty on the property that I'm about to buy.

What I don't want is to be paying two lots of stamp duty