Capital Gains Tax - Removing parent

Sarah_House1

Hi, 

Wondering if anyone can help with some advice on this.
When I separated from my husband 13 years ago my Dad came on my mortgage as I couldn't pass affordability on my own salary. He was added to the deeds but he has never contributed financially or lived in the house. At the time the house was technically in negative equity as i had taken on one of the infamous 125% Northern Rock mortgages.  I now wish to remortgage and remove my Dad from the mortgage and add my new partner - I say new but we have been together for 11 years! Throughout this time I have paid for the mortgage myself with no contribution by anyone else. My house is valued at 300k and my remortgage is 180k  - this is 155k for outstanding mortgage and 25k for home improvements. 
I have an offer but now I have concerns that my Dad may be hit by a capital gains tax bill which I'll have to foot the bill for. Neither my broker or solicitor can help with this and I cant get through to HMRC to check. Can anyone assist at all in helping me get a definitive answer? 
SJ

Comms69

What was the value 13 years ago?

steampowered

Have a really careful look at the documents you have from when the house was first bought.

Was there any documentation put in place (e.g. deed of trust) which states what is your share and what is your dad's share of the property? Is there anything which states whether the property was held as a joint tenancy or as a tenancy in common? That will help enormously.

greatcrested

Yes, your father will have a CGT bill. The question is how much, and whether you help him out by paying it.

What's the gain in value, and what share did your father own?

Sarah_House1

So I purchased the house in 2006 with my husband for 165k but borrowed the deposit and an additional 22k as an unsecured loan so total borrowing was 187k - shown as 156k mortgage and 30k loan.  In 2007 we separated and I took on the house on my own. Northern Rock would not accept me on the mortgage alone as I did not meet affordability criteria so my solicitors suggested adding my Dad I assumed as a guarantor. When the mortgage was changed I had only paid off about 1k of the initial loan. So the property was in negative equity when he was added to it. 

I dont recall anything being said about future issues with CGT but TBH I was all over the place at the time and not really sure what I was doing and completely led by my solicitor at the time. I had suffered domestic abuse with my ex and I wanted him off the mortgage as I was told I couldn't change the locks until it was removed. Those few months spent with items blocking the door were pretty tough.

So checking paperwork it appears to be in joint names, joint names on land registry etc. but like I said my Dad has never contributed or paid anything towards it. So not sure if that means it is assumed he has a 50% share?

My Dad is retired and 70 years old so I'm of course not going to make him pay anything - if there is a charge I'll have to pay it.  I just want to know if he is definitely liable as I'd rather stay on my hugely inflated mortgage rate of 5.9% than having to try and find thousands of pounds I don't have. 

No one seems to be able to help, I'm quite willing to pay for advice just dont know who to turn to. If anyone can point me in the right direction I'd be really grateful. 

blue_max_3

I assume your father has a property already? If so, assuming the increase in value is £120k and he owns half 60k, this site suggests a figure of £9,606. https://taxscouts.com/calculator/capital-gains-tax/
Hopefully that is a worse case scenario.

Sarah_House1

He has a house with my mum which they've lived in for nearly 50 years.  No mortgage and current value about 520k. By looking around I figured we was looking at around that figure too.

The thing that is really bugging me is that my broker is adament that he can gift it to me with no CGT so I'm totally shocked that I only knew we could be liable for this through a third party. This is why I'm so confused.

blue_max_3

Effectively he has given you £60k. He’ll be liable for £9.5k tax, but you could add that to the mortgage as you’re remortgaging. If two of you are then paying for the mortgage, you can maybe overpay and barely notice. 

[Deleted User]

Speak to an accountant.  HMRC's "help" line isn't going to give you tax advice.  If your father had been a guarantor for the mortgage he would have been party to the mortgage but not named on the deeds.  However, your father is named on the deeds so he is a legal owner of the property.  CGT is based on beneficial ownership not legal ownership so what you need an accountant to help you with is establishing that your father was never a beneficial owner of the property.