Is my mum's 'life rented' home in my name a second home?

ylara72

My mum lives in Scotland. To save money down the line, she signed her house over to me when my dad died, so I wouldn't have to pay again when she did. She and my step-dad live there with 'life-rent'. So I can not do anything with the property, cannot evict them and can not live there myself. (Not that I would ever want to do any of those things). Regardless of any legal matters, we all see it as her house.

I live in England and am currently between buying and selling houses. We have been unable to sell our current house, so had to pay stamp duty as a second home (10% vs 5%) when we bought the new house, but plan to reclaim the 5% difference when we sell our old house. I had a horrible thought that possibly my mum's house already counts as a second home, and we would not be able to claim the tax back anyway. Does anyone have any insight into this?

Thank you. 

Bookworm105

in respect of (English) SDLT the Scottish property does not stop you reclaiming the higher rate paid if your current home sells within 3 years of you purchasing the new home 

However, I very much dislike your statement "so I wouldn't have to pay again when she did."
Was that tax advice obtained from a tax professional with professional negligence insurance? 
It appears you are now sole owner of a property you do not live in. Yes mother has a life interest right to live there, but that does not eliminate your CGT exposure and I'll leave others with better knowledge to comment on whether it is now outside IHT or not since it appears it was a gift, not a purchase, from mother but she still benefits from that gift

Grumpy_chap

ylara72 said:

My mum lives in Scotland. To save money down the line, she signed her house over to me when my dad died, so I wouldn't have to pay again when she did. She and my step-dad live there with 'life-rent'. So I can not do anything with the property, cannot evict them and can not live there myself. (Not that I would ever want to do any of those things). Regardless of any legal matters, we all see it as her house.

I live in England and am currently between buying and selling houses. We have been unable to sell our current house, so had to pay stamp duty as a second home (10% vs 5%) when we bought the new house, but plan to reclaim the 5% difference when we sell our old house. I had a horrible thought that possibly my mum's house already counts as a second home, and we would not be able to claim the tax back anyway. Does anyone have any insight into this?

Thank you. 

Why was all of this done?

What is the house worth?
What else does your Mother have in her Estate?
This house will be a GWR "Gift with Reservation" so considered part of her Estate for IHT purposes regardless.
What were you referencing by "I wouldn't have to pay again when she did"?  What "money down the line" is this going to save?
You will now incur CGT when you sell the property on the value form when it was signed over to you to the value when you sell.  

Is there any possibility that your Mother will require care in her later years?
There is every possibility she will be assessed as still having the value of the house that she signed over to you and need to realise that value towards care fees.
This also will not relieve you of the CGT that is accruing.

With regard to the SDLT on the sale of your current PPR and purchase of new, as the current property is not yet sold, you have incurred the second home SDLT.  That can be reclaimed of the current property is sold within the time limit.  I assume you owned your current PPR before the house in Scotland was signed over to you.

ylara72

Bookworm105 said:

in respect of (English) SDLT the Scottish property does not stop you reclaiming the higher rate paid if your current home sells within 3 years of you purchasing the new home 

However, I very much dislike your statement "so I wouldn't have to pay again when she did."
Was that tax advice obtained from a tax professional with professional negligence insurance? 
It appears you are now sole owner of a property you do not live in. Yes mother has a life interest right to live there, but that does not eliminate your CGT exposure and I'll leave others with better knowledge to comment on whether it is now outside IHT or not since it appears it was a gift, not a purchase, from mother.

Thank you for your answer.

The only reason she put it in my name was at the time she had to pay to change it from joint ownership to just herself, and if she had to pay, she may as well put it in my name so I didn't have to pay the transfer fee when she died. It's not a ploy to get out of inheritance tax as she isn't worth enough for that, she just thought she was being kind. I just didn't want it backfire and cost more when I buy and sell my houses that I actually live in.    

ylara72

Grumpy_chap said:

Why was all of this done?
What is the house worth?
What else does your Mother have in her Estate?
This house will be a GWR "Gift with Reservation" so considered part of her Estate for IHT purposes regardless.
What were you referencing by "I wouldn't have to pay again when she did"?  What "money down the line" is this going to save?
You will now incur CGT when you sell the property on the value form when it was signed over to you to the value when you sell.  

Is there any possibility that your Mother will require care in her later years?
There is every possibility she will be assessed as still having the value of the house that she signed over to you and need to realise that value towards care fees.
This also will not relieve you of the CGT that is accruing.

With regard to the SDLT on the sale of your current PPR and purchase of new, as the current property is not yet sold, you have incurred the second home SDLT.  That can be reclaimed of the current property is sold within the time limit.  I assume you owned your current PPR before the house in Scotland was signed over to you.

Thank you for your answer.

She did it as she had to pay to change from her and my dad's name to just herself, and if she had to pay, she may as well put it in my name so I didn't have to pay the transfer fee when she died. We didn't do it to get out of inheritance tax or anything to save money in the long run, she just thought she was being kind and saving me a job when she died. 

There was no ahead planning, and I didn't want it to be a big mistake and effect my buying and selling of my home independent of the Scottish house.

Bookworm105

ylara72 said:

There was no ahead planning, and I didn't want it to be a big mistake and effect my buying and selling of my home independent of the Scottish house.

sorry but it was a HUGE mistake that will make the size of the transfer fee look miniscule when you come to face the CGT tax bill.

- mother is still exposed to IHT (although you say her estate is not "big")
- you are now voluntarily exposed to CGT for a property that you would have got without that on her death
 

Slinky

Could the OP gift it back to his mother now? Thinking it would crystalise the CGT bill at the current value rather than whatever it might be when she passes.

No expert, just musing.