Gifting a residential property

hcosgun

My  sister bought a flat to rent out. She inherited some money and bought the flat without a mortgage. A few months later she got married and now she and her husband are thinking of buying a family home together. However as she already owns a house she has to pay the 4% surcharge in Scotland. I already bought my house with a mortgage and my sister is thinking of gifting me her flat so she doesn’t have to pay the surcharge. Will this cost me anything financially? I mean will I have to pay a surcharge as I have my own property and it is mortgaged? What is the best way to do this?

AdrianC

She wants to give 100% of the flat's value away to save 4%?

That's ridiculous.

Or... she wants to pretend she's giving it away to lie to the tax man and illegally evade tax?

Do you want to run a residential lettings business? Given that it's Scotland, are you licenced?

user1977

If it's purely a gift then no, you won't have to pay LBTT. But do you want to become a landlord?

And if this is part of some cunning ploy where you "gift" the flat back to her later, be aware that the anti-avoidance rules mean that won't work.

MaryNB

She should just sell the flat. I thought that would be the obvious answer or am I missing something? She can sell it with the tenants in situ and you won't be lumbered with the responsibility of being a landlord. If she wants she can then gift you the proceeds from the flat. 

[Deleted User]

hcosgun said:

My  sister bought a flat to rent out. She inherited some money and bought the flat without a mortgage. A few months later she got married and now she and her husband are thinking of buying a family home together. However as she already owns a house she has to pay the 4% surcharge in Scotland. I already bought my house with a mortgage and my sister is thinking of gifting me her flat so she doesn’t have to pay the surcharge. Will this cost me anything financially? I mean will I have to pay a surcharge as I have my own property and it is mortgaged? What is the best way to do this?

This seems like a crackers plan but if you are paying £0 for the property then you will pay £0 LBTT.  Is the cunning plan to transfer the property back to your sister once she and her husband have bought somewhere? 

Your sister might face a CGT bill although if she has only owned the property for a few months that is unlikely to be an issue? 

What will you do with the property? Continue to let it which would mean registering as a landlord and complying with all the other legislation? 

MaryNB

MaryNB said:

She should just sell the flat. I thought that would be the obvious answer or am I missing something? She can sell it with the tenants in situ and you won't be lumbered with the responsibility of being a landlord. If she wants she can then gift you the proceeds from the flat. 

I've had another read of the original post. She bought it to rent out but is she still currently letting it? The title of the thread is confusing me. Either way she should sell it and gift you the money. Do you want the hassle and expense of a second property whether it's to be rented out or not?