Land registry-Gifting / Selling house

bobtrotter

Anyone any ideas on this conundrum.  
My Brother bought my Mum a House approx 10 yrs ago for her to live in (it was put in his name). She already owned an existing house. The idea was that she would sell her curent house (value 70k) and give my Brother the proceeds. The old house is only just now being sold and both my Mum and Brother want the newer house to be in my Mums name. 
So the question is, is it best to:
>transfer the land registry on the new house (value 140k) by way of a gift from my Brother to my Mum. And my Mum gives him the proceeds from the sale of the old house (value 70k) as a separate unrelated transaction
Or
>for my Mum to purchase the new house for 70k (value 150k), with the difference being a gift.
Firstly if you managed to follow this then hats off to you, and secondly if you're able to share any knowledge on this, then that's wonderful.

Slithery

It doesn't really matter. CGT will be due in either case.

davidmcn

bobtrotter said:

So the question is, is it best to:
>transfer the land registry on the new house (value 140k) by way of a gift from my Brother to my Mum. And my Mum gives him the proceeds from the sale of the old house (value 70k) as a separate unrelated transaction
Or
>for my Mum to purchase the new house for 70k (value 150k), with the difference being a gift.

Well, are the transactions separate and unrelated? I suspect not, in which case the latter makes more sense. What difference do you think it makes anyway?

bobtrotter

davidmcn said:

bobtrotter said:

So the question is, is it best to:
>transfer the land registry on the new house (value 140k) by way of a gift from my Brother to my Mum. And my Mum gives him the proceeds from the sale of the old house (value 70k) as a separate unrelated transaction
Or
>for my Mum to purchase the new house for 70k (value 150k), with the difference being a gift.

Well, are the transactions separate and unrelated? I suspect not, in which case the latter makes more sense. What difference do you think it makes anyway?

I wasn't quite sure if there was any implications, if it was done one way or the other

greatcrested

Putting my hat back on....

So 10 years ago there was

House A, owned by mum, but.... what? left empty? rented out? lived in by other family member(s)?

House B, purchased/owned by brother and lived in by mum.

If A is now sold, CGT will be due as it is not mum's main residence, irrespective of what happens next.

If B is transferred to mum's name, then

a) CGT will be due as it is not brother's main residence

b) SDLT will be due if applicable on the Consideration. Since mum is handing over £70K that is the Consideration. Whether it is called a purchase, or a gift in a 'separate unrelated transaction' is legally irrelevant. It's a bit like me paying my roofing contractor in cash, as a gift, so as to avoid paying VAT.......

Calling something a separate unrelated transaction does not actually make it a separate unrelated transaction!

Either way there is a gift element - the difference between the value of B (150K) and the value of A (70K) = £80K. This would therefore be subject to potential Inheritance Tax on brother's Estate if he were to die within 7 years.

davidmcn

bobtrotter said:

davidmcn said:

bobtrotter said:

So the question is, is it best to:
>transfer the land registry on the new house (value 140k) by way of a gift from my Brother to my Mum. And my Mum gives him the proceeds from the sale of the old house (value 70k) as a separate unrelated transaction
Or
>for my Mum to purchase the new house for 70k (value 150k), with the difference being a gift.

Well, are the transactions separate and unrelated? I suspect not, in which case the latter makes more sense. What difference do you think it makes anyway?

I wasn't quite sure if there was any implications, if it was done one way or the other

But you tell us - would the passing of £70k from mum to brother be happening if he wasn't transferring ownership of the house? You can't pretend they're "separate and unrelated" if they're not.

bobtrotter

greatcrested said:

Putting my hat back on....

So 10 years ago there was

House A, owned by mum, but.... what? left empty? rented out? lived in by other family member(s)?

House B, purchased/owned by brother and lived in by mum.

If A is now sold, CGT will be due as it is not mum's main residence, irrespective of what happens next.

If B is transferred to mum's name, then

a) CGT will be due as it is not brother's main residence

b) SDLT will be due if applicable on the Consideration. Since mum is handing over £70K that is the Consideration. Whether it is called a purchase, or a gift in a 'separate unrelated transaction' is legally irrelevant. It's a bit like me paying my roofing contractor in cash, as a gift, so as to avoid paying VAT.......

Calling something a separate unrelated transaction does not actually make it a separate unrelated transaction!

Either way there is a gift element - the difference between the value of B (150K) and the value of A (70K) = £80K. This would therefore be subject to potential Inheritance Tax on brother's Estate if he were to die within 7 years.

Thanks for your detailed response, really helpful
Yes, house A has been empty all this time

bobtrotter

davidmcn said:

bobtrotter said:

davidmcn said:

bobtrotter said:

So the question is, is it best to:
>transfer the land registry on the new house (value 140k) by way of a gift from my Brother to my Mum. And my Mum gives him the proceeds from the sale of the old house (value 70k) as a separate unrelated transaction
Or
>for my Mum to purchase the new house for 70k (value 150k), with the difference being a gift.

Well, are the transactions separate and unrelated? I suspect not, in which case the latter makes more sense. What difference do you think it makes anyway?

I wasn't quite sure if there was any implications, if it was done one way or the other

But you tell us - would the passing of £70k from mum to brother be happening if he wasn't transferring ownership of the house? You can't pretend they're "separate and unrelated" if they're not.

Probably the passing over of the 70k wouldn't happen if the newer house wasn't to be put in my Mum's name. I suppose I mentioned it being separate and unrelated because it wouldn't be documented on any title transfer.

davidmcn

bobtrotter said:

davidmcn said:

bobtrotter said:

davidmcn said:

bobtrotter said:

So the question is, is it best to:
>transfer the land registry on the new house (value 140k) by way of a gift from my Brother to my Mum. And my Mum gives him the proceeds from the sale of the old house (value 70k) as a separate unrelated transaction
Or
>for my Mum to purchase the new house for 70k (value 150k), with the difference being a gift.

Well, are the transactions separate and unrelated? I suspect not, in which case the latter makes more sense. What difference do you think it makes anyway?

I wasn't quite sure if there was any implications, if it was done one way or the other

But you tell us - would the passing of £70k from mum to brother be happening if he wasn't transferring ownership of the house? You can't pretend they're "separate and unrelated" if they're not.

Probably the passing over of the 70k wouldn't happen if the newer house wasn't to be put in my Mum's name. I suppose I mentioned it being separate and unrelated because it wouldn't be documented on any title transfer.

Kidding on that things aren't connected (when in reality they are) doesn't work from the point of view of SDLT, for one example.

greatcrested

bobtrotter said:

davidmcn said:

bobtrotter said:

davidmcn said:

bobtrotter said:

So the question is, is it best to:
>transfer the land registry on the new house (value 140k) by way of a gift from my Brother to my Mum. And my Mum gives him the proceeds from the sale of the old house (value 70k) as a separate unrelated transaction
Or
>for my Mum to purchase the new house for 70k (value 150k), with the difference being a gift.

Well, are the transactions separate and unrelated? I suspect not, in which case the latter makes more sense. What difference do you think it makes anyway?

I wasn't quite sure if there was any implications, if it was done one way or the other

But you tell us - would the passing of £70k from mum to brother be happening if he wasn't transferring ownership of the house? You can't pretend they're "separate and unrelated" if they're not.

Probably the passing over of the 70k wouldn't happen if the newer house wasn't to be put in my Mum's name. I suppose I mentioned it being separate and unrelated because it wouldn't be documented on any title transfer.

Just like when I pay cash to my roofing contractor (to avoid VAT) nothing is documented on any receipt.

In both cases the law is being broken and tax is being fiddled....