are there any tax implications for a joint owner of property paying there share back years later

dinosaur66

i am joint owner of a house with my mother / my deceased father also lived in the house 

we have lived at the house for 23 years

i live in the annexe i had built.

the property was bought outright at the time and set up 50/50 and not set up as unequal shares even though that was the case

my fault, solicitor did not ask any questions and i did not say anything at the time.

can she now pay me a lump sum in bank transfer of £55k so we both will have paid same ammount,

this will be based on the purchase price 23 years ago and not todays value which is 600k

 

the house is exempt from care home fees so no deprevation of home assets, not that there is anything wrong with her.

is the £55k payment classed as deprevation of assets ?

does anyone know what tax will we both be liable for with hmrc  or hopefully none

Keep_pedalling

She could do this without any immediate tax implications if we are talking about a single property as it is your home. Is the annex treated as a separate property for council tax purposes?

There is no need for her to deplete her savings to do this which certainly could be seen as deprivation of assets, as this would be seen as a gift. All that would be needed is for and your mother to complete a deed of trust to show what the actual division of ownership is. This will also require severing of the tenancy if you are joint tenants.

If you are your mother’s only child I can’t really see the point of making any changes after all this time.

Do you both have wills and LPAs in place?

dinosaur66

thank you for the reply

the property is all treated as one property for council tax purposes

we both have wills 

we both do not have lpa`s in place

i am one of 5 children 

if it counts as a gift  i have heard there is a 7 year rule until this money would be exempt which would be fine

i have not ever opened a search on this topic of the 7 year rule though.

i will read up on the deed of trust as i have heard of one but never looked into it

thank you for the advice

Albermarle

If she dies within 7 years of making the gift, then the value of that gift is counted back into her estate when evaluating it for any inheritance tax liability.
However most estates are not big enough to pay inheritance tax, so if that is the case here, then the 7 year rule is not important.
When she dies, she will have her own £325K nil rate band and will also inherit her husbands, so £650K.
As she is leaving her share of the house to her children ( presumably) she will also benefit from the Residence Nil rate band. 

Keep_pedalling

With 4 siblings I can see why you want this sorted. What does her will say about the house? If the will leaves you her share and your siblings get a share of the remaining estate then I can see your suggestion leading to a potential conflict with your siblings 

sheramber

You say the ownership was set up as 50/50

who had the 50/50 shares?
  

Do you one the house 50/50 with your mother? 


What are you trying to achieve?

dinosaur66

my mothers will leaves me the property as sole owner as my will leaves her the property in its entirity plus 

i just read up on the 7 year gift rule and my understanding of it is that how much my mother or i can gift is limited to i think it was £6k a year 

from what i read over this ammount and tax is payable on it 

i never new that

the deeds of trust i have just looked into and i can see we can change each others share of the house to reflect our share of it even if it is 22 years later

i have told all my siblings about the £55k payment and the wills and property and all are perfectly fine with it / we are all a closeknit family never had a row or arguement in 40 years and there would not be a single one of them that would raise an issue .

badmemory

Do not forget that the amount of the gift which is taxable reduces each year until after the 7 years you reach zero.

dinosaur66

thank you abermarle

from my mothers point of view she just wants to pay me back for buying her and my father the property

looking at this gift rule and the bit i read was Ai generted it set limits at £6k a year ?

reading your reply i am guessing she can pay more

could we class it as a loan that is being paid back ?

i have loaned money interest free to my siblings and neices for years 

32k largest ammount -2k smallest ammount

all paid back 

i have never paid tax on any of it but i do have it registered /and signed and documented in my yearly tax accounts and hmrc would have known as banks report anything over 10K albeit i do not know since when.

i can show  proof of the 2003 payment for the house of who paid what ammount if banks keep customers accounts that far back

i was with barclays  when i bought this property and am now with a building society

dinosaur66

sheramber said:

You say the ownership was set up as 50/50

who had the 50/50 shares?
  

Do you one the house 50/50 with your mother? 


What are you trying to achieve?

i bought the property in question for my mother and father in 2003 

i actually paid all 100% of the cost but put the property 50% in my name and 50% in my mothers name 

my father was not on the deeds

i own 50% and have lived in this house with my mother who owns 50% since 2003

the property cost 250k in 2003 and i paid 42k for an annexe in 2005

my mother contributed nothing at the time and i paid the whole ammount

i have also paid all the bills /upkeep and maintenence for the past 22 years 

my mother now wants to pay £55k to me towards the cost of buying the house which she 50% owns 

there is no deprevation of assets on the house payable  . rest of my family are fine with the payment no issues at all.

i want to do it legal with the aim as paying as little tax as possible on the money

Keep_pedalling

badmemory said:

Do not forget that the amount of the gift which is taxable reduces each year until after the 7 years you reach zero.

Not correct, taper relief only applies to gifts exceeding the NRB (£325K)