Bank of parent capital gain worry.

Wibble1937

Hoenir said:

What outcome are you seeking? Is your partner's son making a concerted effort to save? 

Just our original cash back. And son settled in his own house. Referencing anything beyond that would be non-productive.

Wibble1937

propertyrental said:

Given that son is getting a property at a huge discount, it would seem fair to ask him to cover your CGT liability.

Mind you, zoopla price estimates are highly unreliable - you'll need to get several EAs to provide a current value.

As you jointly own, the CGT liability will be split between you so you can utise two lots of CGT allowances (though these are reducing significantly as the gov tries to balance its books!)

Fairness doesn't really come into it. He can barely scrape to to mortgage - there's no way he can cover anything extra. I accept that a formal valuation might well be lower, and there are allowable expenses as well, but we're still likely to lose 25% of our original cash we put in at the purchase. Unless there are other claimable exceptions.... 

thegreenone

Zoopla is notoriously useless at valuations.  We'd be 'rolling in it' if we believed what they said our house is worth.

Get a professional valuation and then ask your partners son to seek advice from a mortgage broker.  If he's lived there for five years rent free, I would hope he has a reasonable deposit.  I believe that you would pay CGT on the difference between the price you paid and the price valued/sold.  Happy to be corrected on that one.  

Hoenir

Charge him rent instead ? At least then you would have an income stream. 

kingstreet

Wibble1937 said:

So, 5 years ago we, civil partner and I bought a house for partner's son to live in, on the basis that he would buy it from us in a couple of years at our purchase price. We were, in effect, holding it for him. No rent expected or paid. Then Covid intervened and a couple of years have turned to 5. His income still limits him to that original purchase price. But the house has (according to Zoopla) increased in value by 225%! We don't want the 'profit' but are we going to get hammered by CGT by that increase in 'value' ? We're basic rate taxpayers living on pensions and a small rental income from another property. I will be seeking paid advice soon, but I'd like some input sooner, if only to stop the sick and dizzy feeling... 

Did someone advise you to do it this way? If so, were the potential implications explained to you as this would appear to be a foreseeable potential problem?

Wibble1937

No advice sought at the time. Foolish in hindsight. But we hadn't planned on a global pandemic wiping out his income stream, delaying the process this long and distorting the housing market such that his tiny place would now be worth ridiculous money. At the original planned timescale things would have been OK all round. 

GDB2222

Go and see a solicitor, on the basis that you had created a trust for your partner's child, and see whether he agrees. There’s a considerable amount of CGT involved and you should take professional advice. 

Brie

I'm wondering if there's a way to make him paying you "rent" to actually be him buying the place.  Isn't that the way Sharia investments work in that interest cannot be charged?  This is assuming you would be fine with getting say £500 a month from him rather than a big lump sum from the bank.

mybestattempt

I think the disposal figure relevant for each 50% share and thus CGT may be different depending on the whether the OP and her partner are in a civil partnership.

If they are, then the son is a 'connected person' to both and the market value of the property at the same date would determine the disposal amount for each.

If not, then the son is only a connected person to his father so the disposal amount of his share would be determined by market value and the OP's disposal amount would be half the actual proceeds.

MEM62

Wibble1937 said:

No advice sought at the time. Foolish in hindsight. But we hadn't planned on a global pandemic wiping out his income stream, delaying the process this long and distorting the housing market such that his tiny place would now be worth ridiculous money. At the original planned timescale things would have been OK all round. 

The best financial solution is to sell it for the full market value.  Take back your original investment and sufficient money to over the CGT and costs.  Then donate whatever cash is left over to your son to assist with the purchase of another property.  

Presumably you son is in a position to contribute some capital to the situation.  What kind of nest egg has me amassed over the past five years? Bearing in mind that he has been living rent/mortgage -free.