2nd home for elderly parent to live in CGT implications ???

BexhillSteve

My Mum was widowed last year, lives some distance from us but struggles, so we thought we could buy her a small flat near us.

1. If we buy in our names only & Mum lives in it, when she passes & we sell, I assume we’re liable for CGT, or would it be different if we made a rental agreement, or if she contributed towards purchase price? 

2. Is that still the case if I buy with my wife and Mum’s name is also on the deeds?

I know about the additional Stamp Duty for a 2nd home & that if we buy in Mum’s name only and she needs to go into care in the future, it could be a problem.

Thanks so much for any advice.

Emmia

Does your mum have a property to sell? If so she should sell that and then buy near you.

Does she want to move nearer to you, or would that mean leaving her friends and neighbours, is your dad interred in the area where she lives?

BexhillSteve

Emmia said:

Does your mum have a property to sell? If so she should sell that and then buy near you.

Does she want to move nearer to you, or would that mean leaving her friends and neighbours, is your dad interred in the area where she lives?

Thanks, she has a small terrace circa 60k, which would only buy a beach hut as flats here cost a lot more. We've discussed this and she does want to move.  

Annisele

Do you have the cash to buy the flat outright, without needing a mortgage? If so, one option might be to lend her the money to buy the flat in her own name, and secure that loan against the property (a private mortgage). You'd probably need legal advice to do that, but the outcome would be that the flat was solely hers, and your initial capital wouldn't be at risk re care home fees.

Bookworm105

the only way for you to avoid CGT is for the flat to be wholly and exclusively owned by mother, as it would then be her exempt main home. However, reading between the lines of your post, that is not what you want either as it would expose the flat to be sold if mother needs to go into a care home and eventually needs to sell to pay for that ongoing care, thereby resulting in losing the money you gave her.

any combination that involves you and/or your wife as listed owners (including as rent "receivers") will result in CGT on sale of the flat applied to your respective share(s), (but not mother's share if she co owns with "you").

old adage, don't let the tax tail wag the dog.
Your mother wants a home near you, that is the prime objective, not avoiding tax and keeping your money risk free (unless you do what Annisele suggests above).

Flugelhorn

CGT ultimately takes a proportion of the increase in the value of the property - not the whole  increase and it is not a tax on the whole value.

Such may be considered to be a reasonable "charge" for being able to do this. 

I have bought a flat for a relative to live in, if I sell it there will be CGT  but that is the price of being able to do this and provide a home for someone, was never meant as investment and certainly won;t make me battle for the best possible price if I do sell it .