HMRC Tax Liability

Decker16

Good morning 

I'm currently remortgaging my home so my friend can purchase her home. If I was to buy home as a second property I would expect to pay stamp duty etc, but this property is going to be her primary residence and not mine.

If I just give her the cash from the remortgage to purchase her home the internet says I would be liable for capital gains tax and it also said something about a gift limitation.

Would anyone have come across this issue when gifting money from a remortgage to a relative or friends.

Thank you.

Dazed_and_C0nfused

Decker16 said:

Good morning 

I'm currently remortgaging my home so my friend can purchase her home. If I was to buy home as a second property I would expect to pay stamp duty etc, but this property is going to be her primary residence and not mine.

If I just give her the cash from the remortgage to purchase her home the internet says I would be liable for capital gains tax and it also said something about a gift limitation.

Would anyone have come across this issue when gifting money from a remortgage to a relative or friends.

Thank you.

Which website says you would have Capital Gains Tax to pay?

And there is no limit on giving money away.  Are you getting confused with potential inheritance tax implications?

Grumpy_chap

Decker16 said:

Good morning 

I'm currently remortgaging my home so my friend can purchase her home. If I was to buy home as a second property I would expect to pay stamp duty etc, but this property is going to be her primary residence and not mine.

If I just give her the cash from the remortgage to purchase her home the internet says I would be liable for capital gains tax and it also said something about a gift limitation.

Would anyone have come across this issue when gifting money from a remortgage to a relative or friends.

Thank you.

What reason have you given to your current lender for the draw down of additional funds?

If you have cash in the bank (whether from a re-mortgage or otherwise) and you GIFT that to a.n.other then there is no liability for any tax of any kind for either you or the recipient of the gift.

A GIFT is final and absolute - you have no expectation of receiving the money back ever and no expectation of any other return in exchange for the GIFT.

The recipient of the GIFT can then use the money in wany way they see fit which might include the purchase of a house or might include a sports car, holiday, jewellery or whatever, or the recipient of the GIFT might just do a moonlight flit and you'll never see or hear from them again.

Assuming the recipient of the GIFT proceeds to purchase a house, then the purchaser of the property will be liable for SDLT and such like.  There will be no charges arising to the individual that gave the GIFT and the donor gets no stake in the property that is purchased.

How long have you known this friend?

Keep_pedalling

Will your friend also need a mortgage on top of your gift to buy this property?

QrizB

Grumpy_chap said:
How long have you known this friend?

This was going to be my question too.

It's possible that you've known this person since you were both at school, have lived life alongside one another, and she's recently fallen onto hard times (a difficult divorce, perhaps) and you're just helping her get back on her feet. A lovely gesture of solidarity.

But it's also possible that you've only known her for a year ot two and this is a long con to defraud you of your assets.

_Penny_Dreadful

Decker16 said:

Good morning 

I'm currently remortgaging my home so my friend can purchase her home. If I was to buy home as a second property I would expect to pay stamp duty etc, but this property is going to be her primary residence and not mine.

If I just give her the cash from the remortgage to purchase her home the internet says I would be liable for capital gains tax and it also said something about a gift limitation.

Would anyone have come across this issue when gifting money from a remortgage to a relative or friends.

Thank you.

What is the plan?

1. To jointly purchase the property with your friend as tenants in common?
2. To lend your friend money to purchase the property solely in their own name with a charge secured against the title?  If yes will you charge interest on the loan?
3. To gift your fiend the money?

Your tax position will depend on the above.

Albermarle

Your friends conveyancer will want to see proof of where funds have originated from.
If there is a also a mortgage provider involved, they will need you sign a document stating it is an outright gift and that you will have no interest in the property in future.

user1977

Albermarle said:

If there is a also a mortgage provider involved, they will need you sign a document stating it is an outright gift and that you will have no interest in the property in future.

A mortgage over the friend's property, that is. What the OP's lender asks for/requires in relation to the purpose of their loan is another matter.

user1977

Decker16 said:

If I just give her the cash from the remortgage to purchase her home the internet says I would be liable for capital gains tax and it also said something about a gift limitation.

Can you point us towards the advice you found on "the internet" and we can help interpret it for you.

I can't see any liability for CGT unless you acquire an interest in your friend's home which you haven't told us about (which seems unlikely if it's genuinely a gift). There is no "gift limitation" other than how your estate is calculated for Inheritance Tax purposes if you die within 7 years of making the gift.

Decker16

Thank you all very informative.

It is a gift to purchase home without mortgage and I don't want an interest in it.  All I may ask is that since I provided all the money for the purchase that it returns to me upon their death hopefully a few decades away.

Decker16

This is the internet reference 

Yes, gifting money for a house purchase to a friend can trigger Capital Gains Tax (CGT) for you in the UK if the money comes from selling an asset that has increased in value (like a property or shares), as hmrc treats a gift as if you sold the asset for its market value, though you won't pay CGT if you gift cash directly from savings or if the asset is your main home (due to private residential relief), but you must report it and use your annual cgt allowance

When You Might Owe CGT:

• Gifting an Asset (like Property/Shares): If you give away a property or shares that have grown in value, HMRC deems you've sold it at market value. You pay CGT on the profit above your annual exemption (£3,000 for 2024/25).
• Not Your Main Home: If the gifted property wasn't your main residence, you might owe CGT on the gain. 

When You Likely Won't Owe CGT:

• Cash Gifts from Savings: Gifting cash directly from your bank account (not from selling an asset) usually doesn't trigger CGT, as cash is not a chargeable asset.
• Private residential relief (PRR): If the gifted asset was your main home, PRR can exempt all or part of the gain.
• Spouse/Civil Partner: Gifts to a spouse or civil partner are exempt from CGT. 

Key Steps & Considerations:

1. Identify the Source: Determine if the money comes from selling an asset with a gain or from general savings.
2. Market valueIf gifting an asset, its market value at the time of gift is used for CGT calculation.
3. Annual Exemption: Use your annual CGT allowance (£3,000 for 2024/25).
4. Report: If you owe CGT, you must file a CGT(often within 60 days). 

In Summary: Gifting money is generally fine, but if that money came from selling an appreciated asset like a house or shares, you're making a disposal and could owe CGT on the profit, so check the source of funds carefully. 

I'm okay as I've know them for over a decade.

The point is I'm not selling but remortgage to release equity so not sure if above applies thank you