House sale - gifting proceeds of sale

GSTAR

Hi all,

I am currently in the process of selling a home that I joint-own with my mum. It's a 50/50 ownership and my share was a gift from my mum. I want to run by some possible scenarios that could occur when we sell:

1. I give my share back to my mum, so she has 100% of the proceeds of the sale.
2. Assuming the above is valid, my mum then gifts 50% of these proceeds to her husband.
3. I decide to receive my 50% share as normal, I then gift this to my dad.

What are the tax implications in each of these scenarios? I have read some information on money.co.uk about gifting to family members and it mentions that a gift can be given tax free to a spouse so long as they are permanently resident in the UK. However how is this determined? For example what if their main home is in the UK but they spend 2 years abroad every now and then?

greatcrested

GSTAR said:

Hi all,

I am currently in the process of selling a home that I joint-own with my mum. It's a 50/50 ownership and my share was a gift from my mum. I want to run by some possible scenarios that could occur when we sell:

1. I give my share back to my mum, so she has 100% of the proceeds of the sale.
2. Assuming the above is valid, my mum then gifts 50% of these proceeds to her husband.
3. I decide to receive my 50% share as normal, I then gift this to my dad.

What are the tax implications in each of these scenarios? I have read some information on money.co.uk about gifting to family members and it mentions that a gift can be given tax free to a spouse so long as they are permanently resident in the UK. However how is this determined? For example what if their main home is in the UK but they spend 2 years abroad every now and then?

1) if you die within 7 years, the value of the gift will be included in your Estate for Inheritance tax purposes. As she is not your spouse, your research is irrelevant

2) Your mother can gift what she likes to her spouse (but this will not affect your Estate's potential liability to IHT)

3) As 1) above.

In al the above scenarios, if the property was not your main residence you may have a Capital Gains Tax liability on your 50%

Mickey666

How does anyone know if the OP's 50% share of the property was a gift or a loan from their Mum?

After all, if it was a loan the the OP would simply be paying back the loan, so no 'gifts' involved - especially if the 'loan agreement' stated that the loan + interest would be fully repaid on the sale of the property (to account for any increase in value). 

However, gift or loan, if the OP is the legal owner of half the property then another consideration might be whether the OP actually lived in the house as their main residence.  If not, then there might be CGT implications with their share of the property.

AnotherJoe

GSTAR said:

Hi all,

I am currently in the process of selling a home that I joint-own with my mum. It's a 50/50 ownership and my share was a gift from my mum. I want to run by some possible scenarios that could occur when we sell:

1. I give my share back to my mum, so she has 100% of the proceeds of the sale.
2. Assuming the above is valid, my mum then gifts 50% of these proceeds to her husband.
3. I decide to receive my 50% share as normal, I then gift this to my dad.

What are the tax implications in each of these scenarios? I have read some information on money.co.uk about gifting to family members and it mentions that a gift can be given tax free to a spouse so long as they are permanently resident in the UK. However how is this determined? For example what if their main home is in the UK but they spend 2 years abroad every now and then?

A gift can be given tax free to anyone. The only potential tax is inheritance.

However, there is a possible flaw in your  1 "I give my share back to my mum, so she has 100% of the proceeds of the sale."

If this home wasn't your main residence, you may end up owing Capital Gains Tax in which case either you'd have o make up the difference from your "half"  or she wont get 100% the proceeds.

greatcrested

Mickey666 said:

How does anyone know if the OP's 50% share of the property was a gift or a loan from their Mum?

OP said " my share was a gift from my mum. "

Mickey666

greatcrested said:

Mickey666 said:

How does anyone know if the OP's 50% share of the property was a gift or a loan from their Mum?

OP said " my share was a gift from my mum. "

Yes, I can read.  By 'anyone' I was alluding to anyone other than the OP and their Mum.

You must have missed by 'wink' smiley

AdrianC

GSTAR said:

I am currently in the process of selling a home that I joint-own with my mum. It's a 50/50 ownership and my share was a gift from my mum. I want to run by some possible scenarios that could occur when we sell:

1. I give my share back to my mum, so she has 100% of the proceeds of the sale.
2. Assuming the above is valid, my mum then gifts 50% of these proceeds to her husband.
3. I decide to receive my 50% share as normal, I then gift this to my dad.

What are the tax implications in each of these scenarios?

Nobody pays tax on a gift.
The only time it might be an issue is for IHT if you die within 7yrs of the gift. That apart, nope.

Sell house. Get your 50% of the equity. Give it away.
<holds cap out, looks deserving>

GSTAR

Thanks for the replies guys. Just to clarify, the property in question was my main residence for a period of 8 years. So I understand there would be CGT payable regardless of what I decide to do with the funds.

If I were to give my 50% share to my mum, i.e. by way of allowing the entire proceeds of the sale to go in to her bank account, does it need to be declared as a gift, or is this automatically assumed?

Thrugelmir

Assumed by whom? 

Gifting of money back suggests it was was never a gift in the first place. 

xylophone

Gifting of money back suggests it was was never a gift in the first place. 

See https://forums.moneysavingexpert.com/discussion/comment/76214435#Comment_76214435

Secretsusie

AnotherJoe said:

If this home wasn't your main residence, you may end up owing Capital Gains Tax in which case either you'd have o make up the difference from your "half"  or she wont get 100% the proceeds.

Picking up on this, I'm thinking of renting as soon as I have an offer on my house, as concerned due to illness, that exchanging and completing on the same set day could be difficult for me medically, so thinking if I rent before completion day it allows me flexibility around what days I pick to move. ( Even tho it will mean two moves).  But if I do this will it mean I'm potentially then liable for cgt as it won't be my main residence on the date of sale?