Tax Implications of Money Transfer for House Purchase

regency_man

Hi,

I'm jointly buying a house with my partner.  Simultaneously I'm selling my soley owned home (complete the same day).  We're each contributing 10% of the value of the new property in cash then the rest on a joint mortgage.  Splitting all the purchase taxes/fees equally.

We have the cash sitting in our accounts, anticipating our conveyancer would want it transferred into their client account ready for completion.  However the conveyancer has said they won't need any money from us to complete the purchase because the residual proceeds from my sale will cover the whole 20% cash downpayment and all of the SDLT/fees liability.   He suggested this is the simplest way to do it and my partner can then just transfer me her 'share' direct from her bank account to my bank account whenever we want.

While I understand this works out the same financially as if she transferred her money to the conveyancer upfront, it just feels like it won't be accounted for properly.

Also would a large £75k+ private bank transfer between two individuals attract the attention of HMRC?  If it did would explaining it was not a gift but that she was essentially just repaying me for loaning her money to buy the house through the sale/purchase transaction be enough to satisfy them?

What would you do in this situation?

Thanks.

[Deleted User]

I see no problems whatsoever with what the conveyancer has suggested. It is clearly not a gift and, in any case, there are no gift taxes in the U.K.  I don’t see how the transfer would ‘attract the attention of HMRC’

regency_man

Correct me if I'm wrong, but gifts are taxable if they happen within a certain timeframe so as to be considered an inheritance? (7 years?)

I guess my concern/thinking is that if it's done through the conveyancer as part of the property transaction there is a clear paper trail as to where the money has come from and what the net proceeds of my sale were.  If it's private there is no paper trail to prove the provenance/purpose of that cash transfer.   But I suppose it would be simple enough to draft a letter/agreement between us both and sign it.

Sandtree

regency_man said:

Correct me if I'm wrong, but gifts are taxable if they happen within a certain timeframe so as to be considered an inheritance? (7 years?)

I guess my concern/thinking is that if it's done through the conveyancer as part of the property transaction there is a clear paper trail as to where the money has come from and what the net proceeds of my sale were.  If it's private there is no paper trail to prove the providence/purpose of that cash transfer.   But I suppose it would be simple enough to draft a letter/agreement between us both and sign it.

Gifted money is considered still part of the estate for IHT purposes if the giver is to die within 7 years but its a sliding scale. Obviously for this to be an issue for you then your estate must be large enough to attract IHT and you have to die within the timescale. 

Clearly you can document that this isn't a gift but simply part of the wider financial transaction.