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  • FIRST POST
    • Bongolia
    • By Bongolia 5th Mar 18, 8:47 AM
    • 7Posts
    • 1Thanks
    Bongolia
    Property purchase partnership and costs.
    • #1
    • 5th Mar 18, 8:47 AM
    Property purchase partnership and costs. 5th Mar 18 at 8:47 AM
    I'm about to purchase two flats with my brother which we will renovate and resell. We're getting a good price as he's a sitting tenant and the owner wants a quick sale. I own my flat but my brother is a first time buyer and he can't afford the full purchase. If he handles the whole process as a single agent he won't pay stamp duty or capital gains on the sale. Can we set up a process which allows us to do this, protects my side of the investment from his sloppy management and doesn't land him with any gift taxes?
    Last edited by Bongolia; 05-03-2018 at 9:49 AM.
Page 1
    • AnotherJoe
    • By AnotherJoe 5th Mar 18, 9:02 AM
    • 9,604 Posts
    • 10,678 Thanks
    AnotherJoe
    • #2
    • 5th Mar 18, 9:02 AM
    • #2
    • 5th Mar 18, 9:02 AM
    What are gift taxes????
    • Bongolia
    • By Bongolia 5th Mar 18, 9:33 AM
    • 7 Posts
    • 1 Thanks
    Bongolia
    • #3
    • 5th Mar 18, 9:33 AM
    • #3
    • 5th Mar 18, 9:33 AM
    Taxes on assets which are given. You can give up to 3000 quids worth without tax and, I think, anything over that is liable to Inheritance tax. I'm trying to work out the cheapest way of handing my 50% of the purchase cost to my brother. I guess I could formally loan him the money, interest free, but I'm not sure if that would incur any other costs. Or whether it's legal!
    Last edited by Bongolia; 05-03-2018 at 9:48 AM.
    • AnotherJoe
    • By AnotherJoe 5th Mar 18, 6:45 PM
    • 9,604 Posts
    • 10,678 Thanks
    AnotherJoe
    • #4
    • 5th Mar 18, 6:45 PM
    • #4
    • 5th Mar 18, 6:45 PM
    Are either of you planning to die in the next seven years ?
    • Bongolia
    • By Bongolia 6th Mar 18, 10:59 AM
    • 7 Posts
    • 1 Thanks
    Bongolia
    • #5
    • 6th Mar 18, 10:59 AM
    • #5
    • 6th Mar 18, 10:59 AM
    Not deliberately!
    • saajan_12
    • By saajan_12 6th Mar 18, 11:19 AM
    • 1,251 Posts
    • 873 Thanks
    saajan_12
    • #6
    • 6th Mar 18, 11:19 AM
    • #6
    • 6th Mar 18, 11:19 AM
    I'm about to purchase two flats with my brother which we will renovate and resell. We're getting a good price as he's a sitting tenant - do you mean hes a tenant in situ or is he under a protected tenancy? and the owner wants a quick sale. I own my flat but my brother is a first time buyer and he can't afford the full purchase. If he handles the whole process as a single agent he won't pay stamp duty - no stamp duty on sales. On the purchase, you'll pay stamp duty on the full value, with the 3% additional rate.
    or capital gains on the sale - if you're planning to renovate and sell in a short time, then I expect the capital gain will be small. Brother will have private residence relief if he continues living there on his share and you'll each have your 11.3k allowance (unless used on other gains). However you'll pay CGT and/or use up your annual allowance. . Can we set up a process which allows us to do this, protects my side of the investment from his sloppy management and doesn't land him with any gift taxes? - no tax on gifts
    Originally posted by Bongolia
    Taxes on assets which are given. - doesn't exist. You can give up to 3000 quids worth without tax and, I think, anything over that is liable to Inheritance tax. - IHT is conditional on the 'gifter' dying within 7 years. I'm trying to work out the cheapest way of handing my 50% of the purchase cost to my brother. I guess I could formally loan him the money, interest free, but I'm not sure if that would incur any other costs. - no tax on an interest free loan, perhaps solicitor / legal costs if you want it to be formally drafted and register a charge. Or whether it's legal!- its legal to lend your brother money. If there's a mortgage involved, brother will need to declare your loan and you may need to place a second charge (behind the bank)
    Originally posted by Bongolia
    I'd suggest you loan brother the money, then there's no CGT / Stamp Duty implications, assuming you have NO BENEFICIAL INTEREST in the property i.e. you don't also get a share in the profit etc. You can charge brother interest as your return from the investment. You'd pay income tax on just the interest portion.
    • Bongolia
    • By Bongolia 6th Mar 18, 4:46 PM
    • 7 Posts
    • 1 Thanks
    Bongolia
    • #7
    • 6th Mar 18, 4:46 PM
    • #7
    • 6th Mar 18, 4:46 PM
    Thanks Saajan, my brother's a tenant in situ and there's no written contract. He rented the property 20 years ago on a verbal agreement with the, now deceased, father of the current owner. It looks like the loan from me is the cheapest way forward and I'll look at getting a contract drafted.
    • 00ec25
    • By 00ec25 6th Mar 18, 7:48 PM
    • 6,506 Posts
    • 6,046 Thanks
    00ec25
    • #8
    • 6th Mar 18, 7:48 PM
    • #8
    • 6th Mar 18, 7:48 PM
    Taxes on assets which are given. You can give up to 3000 quids worth without tax and, I think, anything over that is liable to Inheritance tax. I'm trying to work out the cheapest way of handing my 50% of the purchase cost to my brother. I guess I could formally loan him the money, interest free, but I'm not sure if that would incur any other costs. Or whether it's legal!
    Originally posted by Bongolia
    go and see an accountant for proper tax advice before you make a very expensive mistake!

    Inheritance tax has nothing to do with your plans

    buying a property with the deliberate intention to "do up" and sell soon afterwards is not regarding as a property investment, it is regarding as property development/trading

    investments are subject to CGT, you are not investing

    development trading is subject to income tax because you are trading (buying and selling). You will have to pay income tax on your profits, not IHT, not CGT, and you cannot gift anything
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