Deeds and stamp duty

xylophone

I expect the "rent" that OP pays his parents is a more casual arrangement. If OP lost his job, his parents are hardly likely to make him homeless. The parents probably view the "rent" as an inter-family transfer of money and not something they consider formal income and taxable. I doubt the OP has a tenancy agreement or that the parents insure the building with landlord insurance etc.

How the parents regard the ownership/rents/payments is not the point at issue.

The question is, how do HMRC regard the arrangement under the law.

markelanduk

I'll double check but as far as I'm aware, the house legally belongs to my siblings and I. We just wouldn't contemplate selling it whilst our parents are alive unless it was their expressed wish. Even then, we would probably split the proceeds four ways so my parents got their share.

I'll be extremely disappointed if my parents have been incorrectly advised by the solicitor who made all the arrangements. Naturally, it wasn't a cheap process.

00ec25

markelanduk wrote: »

Even then, we would probably split the proceeds four ways so my parents got their share.

excellent, they can join you in jail for tax fraud - if they get money from the sale that is concrete evidence that they are the beneficial owner of a house they don't live in from which they have been getting rent and therefore owe Capital Gains Tax on its sale

markelanduk wrote: »

I'll be extremely disappointed if my parents have been incorrectly advised by the solicitor who made all the arrangements. Naturally, it wasn't a cheap process.

much more likely is that you simply haven't got a clue what the legal position is and what was actually put in place

Yalpsmol

They may not have been incorrectly advised. Depends how much the solicitor knew about your parents' intention to charge rent on the property and still get a cut on sale, etc.

xylophone

I'll double check but as far as I'm aware, the house legally belongs to my siblings and I. We just wouldn't contemplate selling it whilst our parents are alive unless it was their expressed wish. Even then, we would probably split the proceeds four ways so my parents got their share.

Do you understand the terms 'legal ownership' and 'beneficial ownership'?

If you and your siblings are the legal and beneficial owners, your parents do not have a share.

If you and your parents are the legal and beneficial owners they do have a share.

If you are the legal owners and your parents are the beneficial owners, you don't have a share.

I can't urge you too strongly to clarify the position because if you get it wrong, HMRC might well take a robust view of the circumstances.

xylophone

Capital Gains Tax on its sale

I wonder if they owed CGT on the "gift"?

The OP does not mention how long after inheriting the property the parents made the "gift" - was there a difference between "gift" value and probate value?

Come to think of it, if a genuine gift was intended, and the proposal was within two years of the date of death, wouldn't the solicitor have suggested a Deed of Variation to avoid the property's being part of the parents' death estate?

markelanduk

My siblings and I are the legal and beneficial owners. My parents are neither legal nor beneficial owners. However, we will respect the wishes of our parents while they are alive.

The property was transferred approximately four years after the death of my grandparent.

Slithery

markelanduk wrote: »

I'll be extremely disappointed if my parents have been incorrectly advised by the solicitor who made all the arrangements. Naturally, it wasn't a cheap process.

They could very well have been correctly advised at the time. If this was before 2015 then the higher rate of SDLT wouldn't have existed and so couldn't be accounted for in your parents tax-planning.

xylophone

The property was transferred approximately four years after the death of my grandparent.

Was the value of the property higher then than at probate?

Presumably as this was done through a solicitor they checked on the CGT position.

My siblings and I are the legal and beneficial owners. My parents are neither legal nor beneficial owners. However, we will respect the wishes of our parents while they are alive.

Then my understanding (but I am not an expert) :-

You are a beneficial owner of this property, therefore any property you buy will be a second property.

If you make a gift of your interest in this property (which is your PPR so no CGT) to your siblings, the property you buy will not be a second property - for this to be the case the gift to your siblings would need to be outright and without reservation of benefit.

The gift will become a Potentially Exempt Transfer for IHT purposes on your estate.

If you retain your interest (with higher SDLT consequence on second property purchase), then if the house is rented out, you and your siblings are the landlords (with the responsibilities that entails) and the rental income is taxable on you and your siblings.

If the transfer of the property to you and your siblings was more than seven years ago, so it should qualify as an exempt transfer for IHT purposes.

Be aware that even if successful from the IHT viewpoint, if your parents still able to use the asset or to benefit from it, POAT may apply - see post 24 above.

You may wish to take expert advice on your best course of action.

sammyjammy

If the situation arises that, when you move out, the house is rented, remember it will be you and your siblings that are the landlords not your parents.