Advice Please | Split Property & Gift Half The Property

Chapter10

My Father is 80 and would like to gift half of his home to me and my sister, and continue living in the other half.
As the property can easily be split into two separate flats, (ground floor, and first floor)

1. Is this something that would make the property gifted exempt from tax?
2. Could he live in the new half of the property without having to pay rent as this would still be his own property?

My father has never been married.

Any information / recommendations for professional advisors in London would be much appreciated.

p00hsticks

What is he aiming to achieve by doing this ?

How much is his entire estate worth ?

Who'd do the conversion ? Before or after it was gifted ?

From my understanding, assuming it's converted before, he'd be gifting you and your sister a flat, so it's potentially a PET - it'd form part of his estate if he died within seven years or making the gift. Would you and your sister be living in the flat - if not, then make sure you get the flat properly valued as soon as it's converted / gifted as you;ll need to know th value for future Capital Gains Tax calculations if/when you come to sell it.

Chapter10

Thanks.

So if the home is converted before it is gifted it is Potentially Exempt Transfer? Yes, its likely we both or one of us will be living in the flat.

Would my father be able to live in Flat 2 after conversion and gifting of Flat 1?

theoretica

There is an added complication in how the property is -legally- split and it might need planning permission for change of use from 1 dwelling to two. Not to mention council tax etc.  If the property is legally split into two flats and he gives one away, that will be different for tax reasons than if he gives away a 50% share in the whole building which contains two flats...

theoretica

Also, if you (or your sister) do not both live in the other flat, the share owned by the person living elsewhere will have capital gains tax due when it is finally sold or transferred.

Jeremy535897

There should be no inheritance tax implications of your father continuing to live in one of the flats, so long as he doesn't have any use of or interest in the other flat. Care would need to be taken over who owned the freehold reversion though. Proper advice needs to be taken.

As noted above, he would have to live for seven years from making the gift for the gift not to be included in the value of his estate.

Chapter10

theoretica said:

Also, if you (or your sister) do not both live in the other flat, the share owned by the person living elsewhere will have capital gains tax due when it is finally sold or transferred.

It's likely I will live in the flat as my sister already has a flat of her own. Thank you very much for your contribution, its all been quite complicated to get my head around.