Second Home Gifting

Juliette100

I am hoping someone can help me. 
I currently live in my property and have done for over 40 years. The property next door to me has become available and I plan to buy this and gift it to my brother who is a full time carer to my disabled mother.  The second property will be in my brothers name day one and I will not live there. The idea and comfort of having my mother and brother living next to me is reassuring. 
My home of 40 years will remain my main residence and I’ve no plans to move, rent or have any claim on the second property I bought. My brother is aware of inheritance tax within 7 years and I’ll be paying initially the higher stamp duty. The main concern I have is capital gain. Would this be payable on the gifted property and if there was CGT due how it how would this work as I will make no gain on this as it’s a gift. I’ll merely buy the second property and with no gain or loss I would change it to my brothers name and hand over the keys. 
Any guidance on this would be great. Juliette 

Sibbers123

If your brother doesn't currently own a property, why not gift him the cash to purchase the property. This will avoid the the SDLT surcharge. It will also avoid the two lots of legal fees.

If that is not possible, for whatever reason, then there will be no CGT on the gift as long as the property doesn't increase in value between the date you purchase it and the date you gift it. No SDLT will be payable on the gift provided there isn't a mortgage on the property.

Juliette100

Sibbers123 thank you for your quick response this is really helpful.  I’ve been mulling this over and going in circles if this is possible or whether too costly to do due to CGT.  I’m hoping to put the property into his name day one, if I can,  but if I have to purchase first and then transfer I’m ok with this too - other than extra legal costs as you said I’ve not purchased a home for over 40 years and will get a lawyer and accountant to keep this correct but even if I purchase in my name and then transfer over it will be a very short period - as long as it takes the lawyer to action this -  and given the current climate I think the property value will remain unchanged.  Although buying the property but adding him as the owner on purchase would be ideal. 
I could transfer the cash but he’s uncomfortable with that as he’s living in rented property and feels this looks odd to suddenly come into a cash sum overnight.  The property would have no mortgage on it. 
I was looking at the higher stamp duty and I don’t think I can claim that back in the second property if I gift it but again this is something I could live with if mum was closer to me as my current weekly commute of over 60 miles to see her is getting tough to do especially now with covid. 

Keep_pedalling

It would be silly for you to pay stamp duty just because your brother feels uncomfortable being given the money. Plenty of people people pay for houses with gifted money so it is in no way odd. The gift could always be placed in the client account of the solicitor dealing with the house purchase rather than in his account if he really won’t do it.

xylophone

I could transfer the cash but he’s uncomfortable with that as he’s living in rented property and feels this looks odd to suddenly come into a cash sum overnight.  The property would have no mortgage on it. 

The money does not have to go into your brother's account - I'd suggest that you and your brother consult a solicitor to see how the gift can be applied to the purchase of the property in his name.

Juliette100

Thanks everyone this info is very helpful.  It does seem best to gift the money so he can purchase the property himself and without me being hit for the higher Stamp Duty.   I'll need to work on him and get him in front of the lawyer to make him feel comfortable with this.  But it seems the easiest and more straightforward option rather than having to pay and lose stamp duty

xylophone

 I'll need to work on him and get him in front of the lawyer to make him feel comfortable with this. 

Just a thought - are your brother and mum happy to move into the house next door?

Will you need to increase your gift to make any adaptations for your disabled mother?

Does your brother have sufficient means to cover maintenance etc of the property?

greatcrested

Juliette100 said:

...... The second property will be in my brothers name day one and I will not live there. ...
My home of 40 years will remain my main residence and I’ve no plans to move, rent or have any claim on the second property I bought.

In that case, you are not buying it. You may be handing the money over, either to your brother, or to HIS solicitor, but if the property transfer is from the current owner's name into your brother's name, then your brother is the buyer.

So there's no 2nd property SDLT and if your brother is a FTB he can benefit fro FTB status.

Yes, if you die within 7 years, the gift to your brother will be included in your Estate for IHT - but that's a matter for your Executers. Of course, if you did NOT make this gift to your brother the money would still be in your Estate anyway.

If your brother subsequently sold the property there would be no CGT liability since it is his main home and therefore exempt.

ps - the idea that you buy it in your own name and then immediately transfer it into his name is bonkers both in terms of making the whole process far more complex than it need be, and in taxation terms.

Juliette100

Thanks greatcreated.  
xylophone. Yes he’s happy to move next door and my mum is too. In fact having us all within walking distance is helpful as travel at the moment is getting challenging.   Funds on my brothers side are lean but he has calculated he can maintain the property and we can ensure the layout works for my mum’s wheelchair etc.