11 year old Beneficial property owner

Milanoli_72

Happy New Year to everyone, first post on here...

Myself and my wife jointly own a property which we purchased in 2011 and have rented out ever since.

I would like if possible to make my 11 year old son the Beneficial Owner of this property to take a advantage of his £12,500 tax free allowance. Is this possible?

MovingForwards

No, he's not old enough and you'd also mess up his first time buyer status.

Milanoli_72

Thanks, how old does he need to be? He wouldn't be the legal owner so wy would that effect 1st time buyer status?

MovingForwards

18
Beneficial interest is still classed as owning it.

Dead_keen

A child can be the beneficial owner, that's fine.

From a tax perspective, the child's rental profit would be taxed on the parents: https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4300

Gifting the property to the child would be a disposal for capital gains tax purposes (with the deemed market value being used as the disposal proceeds).

This would also be a PET for IHT purposes.

If the property is mortgaged, think about SDLT.

You'd also need to think about the practicalities associated with renting out the property (e.g. insurance in the child's name, etc).  

Grumpy_chap

Milanoli_72 said:

Happy New Year to everyone, first post on here...

Myself and my wife jointly own a property which we purchased in 2011 and have rented out ever since.

I would like if possible to make my 11 year old son the Beneficial Owner of this property to take a advantage of his £12,500 tax free allowance. Is this possible?

I wasn't aware that there was a minimum age to own property or the comments by others about the income being taxed as parental income.

Anyway, they are all correct and you can't do it as other said and as explained in this article:
https://www.property-tax-portal.co.uk/can-i-buy-property-for-a-child-under-the-age-of-18.shtml
which was the first result from an internet search "youngest age to own property" and exactly addresses your question

Hypothetically, if you were to do this, then your son would own the property and the income arising to do with what he wished.

Jeremy535897

Grumpy_chap said:

Milanoli_72 said:

Happy New Year to everyone, first post on here...

Myself and my wife jointly own a property which we purchased in 2011 and have rented out ever since.

I would like if possible to make my 11 year old son the Beneficial Owner of this property to take a advantage of his £12,500 tax free allowance. Is this possible?

I wasn't aware that there was a minimum age to own property or the comments by others about the income being taxed as parental income.

Anyway, they are all correct and you can't do it as other said and as explained in this article:
https://www.property-tax-portal.co.uk/can-i-buy-property-for-a-child-under-the-age-of-18.shtml
which was the first result from an internet search "youngest age to own property" and exactly addresses your question

Hypothetically, if you were to do this, then your son would own the property and the income arising to do with what he wished.

If you look at the link you provided, you will see that the parents can act as bare trustees, and control the asset and income arising from it (for the child's benefit of course) until the child attains age 18. However, that doesn't overcome the issues of capital gains tax on the transfer to themselves as bare trustees for the child, or the matter of the income being taxed on the parents until the child attains age 18, or the SDLT issue, or the PET issue, or the first time buyer issue.

FatherTireseus

And apart from the issues around CGT, rental income taxed as the parents and everything else mentioned...if the property was to be passed over in trust to the son, he could be entitled to take legal ownership of the property at age 18 and possibly sell the property...?

getmore4less

Would be a bit of a problem if under 18 could not beneficially own property via a trust.

Cause a lot of issues for inheritance.

Grumpy_chap

Jeremy535897 said:

Grumpy_chap said:

Milanoli_72 said:

Happy New Year to everyone, first post on here...

Myself and my wife jointly own a property which we purchased in 2011 and have rented out ever since.

I would like if possible to make my 11 year old son the Beneficial Owner of this property to take a advantage of his £12,500 tax free allowance. Is this possible?

I wasn't aware that there was a minimum age to own property or the comments by others about the income being taxed as parental income.

Anyway, they are all correct and you can't do it as other said and as explained in this article:
https://www.property-tax-portal.co.uk/can-i-buy-property-for-a-child-under-the-age-of-18.shtml
which was the first result from an internet search "youngest age to own property" and exactly addresses your question

Hypothetically, if you were to do this, then your son would own the property and the income arising to do with what he wished.

If you look at the link you provided, you will see that the parents can act as bare trustees, and control the asset and income arising from it (for the child's benefit of course) until the child attains age 18. However, that doesn't overcome the issues of capital gains tax on the transfer to themselves as bare trustees for the child, or the matter of the income being taxed on the parents until the child attains age 18, or the SDLT issue, or the PET issue, or the first time buyer issue.

Thanks Jeremy, but the point I was making if it was hypothetically allowed "son would own the property and the income" aligns with your entirely correct (and far better phrased) comments "the parents... control the asset and income arising from it (for the child's benefit)"

Whether in a trust (which is allowed) or the transfer of the property to the son (not allowed), the effect is that the property and income is solely for the benefit of the son and the parents needs to manage that in the interests of the son - rather similar to power of attorney I understand.  The capital and income could not simply be spent as the parents wished - a weekend MG-B or such like that the parents may enjoy would likely not be sufficiently in the interests of the son.

As I read the OP, the idea was simply an idea to take advantage of the son's personal allowance and then simply declare the income as being the parent's again when the son is self-earning.  That part is specifically ruled out by the taxation as parental income until the child is 18.

I may have read the OP incorrectly and, if the parents genuinely wished to have the property solely for the benefit of their son, then the other matters possibly self-resolve:

• CGT on transfer of the property will be payable by the parents at some point.  A sale now would allow the CGT to date to be fixed and take advantage of the parent's annual allowances.  When the son then sells, the further CGT will be funded from the property and there will be another annual allowance for the son.  This split could reduce the total CGT...
• SDLT will need to be paid now (by the son / trust) but the parents could loan the money and the SDLT could be met from the first few months of rent received by the son
• PET is best addressed by gifting while the donor is "young and healthy" such that they are likely to last the 7 years and also DoA is not a concern.  Given the parents have 11 yo son, I assume they are not near to their dotage and would therefore be gifting while "young and healthy".  It is quite likely to be a sensible means of avoiding IHT if that is the aim.
• Loss of first time buyer status may not be a massive issue for the son, given that can be offset against the value of the property asset and income accrued over the next 7 years until 18 and direct control.

Actually, if the purpose is to set their son up well for life with a substantial capital head-start, then gifting the rental property (via trust) may reduce life-time taxation on the parents / estate and (from only 7 years' time) can utilise the son's income tax personal allowance.  It is just in the mean time, the desired reduction of income tax will not be realised.

I did not read the OP as a query about how to best set the son up with a financial head-start, but just an idea to avoid immediate income tax.  That said, the financial head-start may be a good idea and may allow the son to make his own decisions about financing post-18 study should he choose it (rather than the parents providing support at that stage) and / or maybe it would be what the son needs to start his own entrepreneurial business and be the next Elon Musk.  This is probably outside the intent of the OP and the original question.

Jeremy535897

You have to be very careful about this sort of giving. Leaving aside all the tax issues for a moment, as soon as parents give the beneficial interest in a property to a child, they as bare trustees must look after the interests of the child. Any financial adviser, looking at the overall wealth of the child and the level of risk of the investment, would reach the conclusion that it is probably the duty of the parents as bare trustees to realise the property as soon as is practical, to enable the child's wealth to be invested in a broader based and less risky portfolio of investments.