Parents gift me main home, changing my current home, then I gift money to parents, CGT

puloton

The idea - parents gift me main residence, buy another, then I sell my current residence and make the gift my main home, then I gift money to parents.

My parents own one house mortgage free (~700k), which they want to gift to me, before buying a different house (~800k).

I already have one property mortgage free (~450k), which I plan to sell once I have been gifted my parents' current home.

After I sell my property, I would like to gift the money from that sale to my parents. Would this monetary gift be seen as a gift by HMRC? Or as something in return for the home they gifted me? The purpose is to sort of partially fill up the void left by their purchase of the new property. Overall, if they have gifted me a property worth 700k, and I give them 450k, it would still be the equivalent of just them gifting me 250k worth of assets, right? But I don't know if the taxman would see it that way.

Other questions:

- once they gift me the property, would I have to pay SDLT on it, as it's my 2nd property until I sell my 1st? What about CGT?

Thank you

[Deleted User]

The gift of their house will count towards their estate as with any other gift. Obviously the seven year rule comes into play. It is a £700k gift. 

I assume that the house you are intending to sell is your main home and potentially free from CGT. The gift of the £450k proceeds is not netted off the £700k. It is a £450k gift. Theoretically you could set up the £700k as a loan and you are now repaying £450k - all very messy!

If you really want to go down this route would it not be better to sell your house first, receive a gift from your parents of £250k and buy the house off them at the full value? This way the gift is £250k in cash which could potentially disappear after seven years?

I know very little about SDLT but I would imagine that this would avoid the ‘two property’ problem?

xylophone

 already have one property mortgage free (~450k), 

This is your principal private residence?

Why not just sell it and buy your parents' house by way of cash/interest free loan from your parents?

Jeremy535897

There are three taxes to consider, SDLT, inheritance tax and capital gains tax. Stamp duty is paid on actual consideration, so if there is none (consideration includes taking over a mortgage, but this is not happening), no SDLT is payable, but if there were any sort of guarantee that you would give your parents £450,000, that could amount to consideration. Buying a second property will cause the higher rate of SDLT to apply to the second purchase.

Capital gains tax is not an issue if the house gifted to you is and always has been their main residence throughout their ownership, and you will sell your main residence and occupy your parents' old house as your main residence.

Inheritance tax is more likely to be an issue here. There is no longer any mutual transfer relief, so your parents would be treated as making a gift to you of £700,000 and you would be treated as making a gift to them of £450,000. It does not stop here, though. If your parents can manage without your gift of £450,000, and there is no guarantee you will make that gift, it may be that the gift with reservation rules do not apply, but the POAT rules probably will. This is a complex area that needs proper professional advice.