Tax implications of part-buying a house for elderly parents

goldilocksno1

My elderly parents are moving from the Midlands to the South. They have a house worth c£200k and to get the equivalent here will cost an additional £100-£150k which I have agreed to fund. Can anyone please advise on the tax implications involved in relation to capital gains and Inheritance Tax. Are there any tax efficient ways for my husband and I to help with this purchase.

Thank you

sneekymum

The additional £100-£150k is not money they gave you, is it ?

(This is important)...

goldilocksno1

Hello Sneeky Mum

No it isn't. It's very hard earned money which is why we are so concerned about a potential nightmare scenario of using our money to help them buy a similar standard property in the South and then ultimately having to pay IHT or capital gains on money which was ours to begin with. The situation is further compounded by the fact that my mother has early Alzheimers and may eventually need care home facililities so we are also keen to ensure that we do not end up having our money used by the authorities to pay for her care!

I appeciate that this is a fairly complex situation but would welcome any advice from anyone who might be able to suggest a way forward.

Robert_Sterling_3

If you pay £100,000 and they pay £200,000

You could own the house as one sixth yours, one sixth your partners, and two thirds theirs.

goldilocksno1

Thanks Robert but does this get round any issues with inheritance tax?

Robert_Sterling_3

Inheritance tax only kicks in at £275,000 per person.
Ownership of property should be divided by all four interested parties as Tenants In Common {TIC} and not as Joint Tenants {JT}.
The respective shares would be for example:-

one sixth you, one sixth husband, one third father, one third mother, assuming a value £300,000 initially !! £50,000 £50,000, £100,000 £100,000

or if house cost £360,000 ( to get round numbers ) then

£60,000 £60,000, £120,000, £120,000.

The parents each make a will leaving their share of the property to be
divided between you and your husband.

Now you own one third husband owns one third and surviving parent owns one third.

Surviving parent also leaves their share of house in due course to you both.

This way up to £550,000 passes free of IHT.

I think next year the £275,000 nil rate band becomes £300,000 nil rate band
making it possible to not worry about total inheritance of £600,000.

Note also that you may be liable to Capital Gains Tax as the house will not be your primary residence.

These are just general observations.

This is not financial or legal advice

goldilocksno1

Thanks again Robert.

ioscorpio

Try these couple of sites, there is a lot of property investors who might be better advised on the subject of capital gains tax or speak to a financial adviser/tax planner.

http://www.singingpig.co.uk/discussion/forum/

http://www.streetwisepublications.co.uk/forum2/