Changing ownership of rental properties.

37eeyore

My brother-in-law and I jointly bought two properties which we renovated and have been renting out for a number of years. On the deeds of one we are joint owners and on the other we are tenants in common. Owing to a change in personal circumstances we would like to split the ownership so that we own a property each. Both houses are worth the same so no money would change hands. I have filled in the necessary forms (AP1, TR1, ID1 and Land Transaction Returns) but it is unclear whether or not we will have to pay stamp duty or any other type of tax. The properties are worth £360,000 each so I think stamp duty on half of the value would be £6,500 each. Does anyone know if tax would be due or if there is a better way of doing this?

37eeyore

Forgot to mention, there are no mortgages involved.

BoGoF

Potential for Capital Gains Tax if the properties have increased in value since you acquired them - you will be treated as disposing of your half share at market value.

Retired_Mortgage_Adviser

Stamp duty should not be an issue with a deed of gift, as it is only payable if there is a mortgage attached.


Under current rules, HMRC will consider the donor liable for CGT.


The above is very very crude information. It would be advisable to pay for advice from an accountant with knowledge of these matters and who can consider the entirety of your circumastacnes.

37eeyore wrote: »

My brother-in-law and I jointly bought two properties which we renovated and have been renting out for a number of years. On the deeds of one we are joint owners and on the other we are tenants in common. Owing to a change in personal circumstances we would like to split the ownership so that we own a property each. Both houses are worth the same so no money would change hands. I have filled in the necessary forms (AP1, TR1, ID1 and Land Transaction Returns) but it is unclear whether or not we will have to pay stamp duty or any other type of tax. The properties are worth £360,000 each so I think stamp duty on half of the value would be £6,500 each. Does anyone know if tax would be due or if there is a better way of doing this?

37eeyore

They have increased in value by a considerable amount. On the Land Transaction Form I have ticked the box to say that the land is being exchanged/part-exchanged. Neither of us will gain from the transaction in any way. We will still own assets of the same value as before. Does this still count as a Capital Gain?

BoGoF

You will still be liable to CGT. You have disposed of a share of an asset and the fact you have acquired half share of another is irrelevant.

You may wish to reconsider.

37eeyore

I think I need to investigate this further. It may be better to just alter the way we own the property where we are joint owners. Unless anyone has a better idea?

Retired_Mortgage_Adviser

Unfortunately, I don't think there is any straightforward way to avoid CGT liability.

It might be best to consider alternatives or status quo.

https://www.telegraph.co.uk/finance/personalfinance/capital-gains-tax/11124506/Capital-gains-tax-Can-we-swap-houses-and-cut-our-tax-bill.html

37eeyore wrote: »

They have increased in value by a considerable amount. On the Land Transaction Form I have ticked the box to say that the land is being exchanged/part-exchanged. Neither of us will gain from the transaction in any way. We will still own assets of the same value as before. Does this still count as a Capital Gain?

BoGoF

37eeyore wrote: »

I think I need to investigate this further. It may be better to just alter the way we own the property where we are joint owners. Unless anyone has a better idea?

Depends on your motives for doing so. From an HMRC perspective they will deem you to be 50/50.

37eeyore

With the state of ownership it's not the taxman I'm worried about, it's my brother-in-law's girlfriend!

BoGoF

Perhaps legal advice is what is required then?