House purchase for children

Grumpy_chap

Allandsundry247 said:

My husband and I bought a house as an investment in our young adult children's name for their future. We would like to let it out and claim the income for ourselves to recoup some of the funds we used to renovate it. We know it is listed as additional income for tax purposes and would do that but can we let it out as our names are not on the deeds.

That does seem to have been a very generous gift.
What was the reason for making that gift?  Was it unbridled generous altruism?

How old are you?
How old are your children?
If your children are old enough, were they involved in the purchase decision for this house?
Where do you and your children currently live?  (Obviously not in the purchased house, so do you all live in a family home?)
Is the house debt-free?
Have you only recently made the purchase, or did you buy the house when the children were young and they are now "young adults"?
What advice did you take before buying this house for your children?

What is done is done.  You now have to accept that you have gifted the value of a house to your children (very generously).
That means the children own the house and the liabilities of the house need to be met by your children.  Do they have an income stream to cover insurance, maintenance, Council Tax while the property is vacant?
Any decision about the use of the house (the children might choose to live there) or to let the house out or to simply sell up is for the children to make.
Any income arising from the letting of the house is the children's income - it is not your income.
Any proceeds from selling the house will be your children's money - it is not your money as you gifted the house.

Here are some other things to consider:

• There are restrictions on the type of contracts that can be entered into by minors - that may prevent the children from letting the house out.
• If the house was gifted so that you are eligible for means-tested benefits, the gifting of the house will be deemed DoA (deprivation of assets).  The children still own the house (and get any income arising from the house), but you will be deemed to still have the value of the house for benefits purposes.
• If the house was gifted to avoid care fees, DoA again - same comments.
• If the house was gifted to avoid IHT, but you wish to take the income from the house, that is GWR (gift with reservation) and will be deemed to still form part of your estate for IHT purposes.
• If the house was gifted to retain current family home which is Social Housing of any kind, entitlement to the Social Housing is likely forfeited - DoA and / or GWR
• If the house was gifted to avoid higher rate income tax on any income derived, that may be caught by the rules on savings income tax liability being treated as the parents' income tax liability when children are minors.  
• Your children now own a house.  That means they have lost their FTB (first time buyer) status.  That is not a reversible loss of status under the current rules.
• Your children will incur second-property stamp duty if and when they chose to buy a home to live in.
• Your children will incur CGT when the house you gifted is sold (though you would incur CGT otherwise).
• If your children ever wish to claim means-tested benefits, the value of the house will likely put them above the eligibility threshold.

This forum will be able to provide more advice and accurate comment if you can answer the questions that arise from the above.

housebuyer143 said:

Do you kids a favour and change it back. If they don't own a house you have now burdened them with higher rate of stamp duty and made them ineligible for means tested benefits. They will also be stuck with a capital gains tax bill when you sell. 

Either it's theirs or it's not. You can't just keep the rent etc. 

That really is not as simple as that.
The house was never the parents' and cannot be "changed back" to something it never was.
The house belongs to the children.
If the house is sold, the children get the proceeds of the sale.  The children can buy a Ferrari with the money if they wish.