Buying % of house from parent

lookstraightahead

Have you gone over all of the legal stuff with deprivation of assets (with regards to the gifting) 

billy2shots

How is the business structured? You (mil) may have to factor in capital gains tax or the tax could be deferred to you so you will pay it if you sell.
HMRC could be looking very closely at you if you 'gift' her money and she 'gifts' you the business with a possible view of tax avoidance. 

ZanyZoo

RAS said:

I appreciate that MIL is probably fond of the house, but it might well be better to bite the bullet and just sell up as a "going" concern.

At her age MIL could live another 20 years and how is she going to fund renovations on her lower third of the property, or even maintenance? Even worse, if the rental folk discover she's local firstly, and related to the owner, she'll inevitably get drawn into the day to day issues with the rentals.

"This doesn't work, sort it!"
"We can't make this work, show us."
"We've just damaged something, where is the stop-!!!!!!, fuse box?"

And you'll be wanting her to give a key to the tradesman or the delivery people. OK it might give her purpose but it might also prevent her leading a different life.

We want to purchase as I intend it to be my main source of income eventually. It's in a very popular tourist town and I would hate to see it go into the hands of another holiday cottage company which it enevitably would. 
I am 5 mins away and would see to any issues personally so she shouldn't be bothered with this. I guess it will work for her as it means she can stay in the town, if she sold up she would struggle to find a smaller property to live in as they have all been snapped up by said holiday cottage companies. 

ZanyZoo

lookstraightahead said:

Have you gone over all of the legal stuff with deprivation of assets (with regards to the gifting) 

No not really although I believe we would still be liable for Inheritance Tax, who is best to advise on this? 

ZanyZoo

billy2shots said:

How is the business structured? You (mil) may have to factor in capital gains tax or the tax could be deferred to you so you will pay it if you sell.
HMRC could be looking very closely at you if you 'gift' her money and she 'gifts' you the business with a possible view of tax avoidance. 

I obviously need some tax advice. I'm not trying to do anything dodgy I just want a solution that works for everyone. 

xylophone

Does MiL have any objection to simply selling up and buying a property more suited to her needs?

billy2shots

ZanyZoo said:

billy2shots said:

How is the business structured? You (mil) may have to factor in capital gains tax or the tax could be deferred to you so you will pay it if you sell.
HMRC could be looking very closely at you if you 'gift' her money and she 'gifts' you the business with a possible view of tax avoidance. 

I obviously need some tax advice. I'm not trying to do anything dodgy I just want a solution that works for everyone. 

It's a minefield. Professional advice is something that worth its cost. 
I'm happy to save on mortgage broker fees and IFAs cost but when it comes to business, a good professional will more often than not save you many multiples of what you pay them. 

Annisele

ZanyZoo said:

I guess the other option is to try and purchase the whole property with a mortgage and charge her rent for the ground floor.

I suspect that itsn't actually an option, gift or no gift. It sounds very much like "sale and rent back", which for all practical purposes is now illegal. (Technically it isn't actually illegal, but you can't do it without a bunch of regulatory permissions - which I suspect you're unlikely to get. The point of the regulations is to protect desperate homeowners from people who buy their homes at a knock down price then jack the rent up / evict them. I appreciate that's not what you're wanting to do - but the everybody says they wouldn't do that, so the rules have to apply to everybody.)

Adding a gift from your MiL makes things tricky again. Basically mortgage lenders want to be able to repossess properties if the borrower doesn't pay. But if the person living in the house has rights that pre-date the lender's rights - eg if the occupier has effectively paid upfront for a lifetime's right to occupy the house - that makes possession difficult or impossible. So lenders tend to run away from this sort of scenario.

getmore4less

ZanyZoo said:

getmore4less said:

Don't need to have a gift involved she can act as a lender if she does not need all the money up front.

She sells you say 2/3 of the place for £233k and you pay her back maybe some now or on an ongoing basis.
or
buy all of the place and you pay her back.

Don't forget the SDLT  and CGT later on.

What about she keeps the property and you just run the business

I think she would like the money up front to live on for however long she has left... 
The property needs quite a bit of renovation to bring it up to modern expectations! So it's not just a case of taking over the business we would be investing also so thought it would be best to purchase...? 

She won't need it all upfront  if it is to live on.

Also sounds like she is not loaded so IHT is probably not an issue with £500k nil rate band and maybe some transferable 

as said you first need to establish what it is you are buying and how that is structured.

lookstraightahead

ZanyZoo said:

lookstraightahead said:

Have you gone over all of the legal stuff with deprivation of assets (with regards to the gifting) 

No not really although I believe we would still be liable for Inheritance Tax, who is best to advise on this? 

The gifting is to do with deprivation of assets. If she needs the money for care etc in the future the government can claim this back -  her assets can't be given away to avoid care home fees.

its important to take this into consideration. Lots on the government website. It's natural for people to think their relatives willing not need care, and hopefully she won't, but no one can know this in advance.