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  • FIRST POST
    • cts_casemod
    • By cts_casemod 14th Sep 18, 8:14 PM
    • 229Posts
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    cts_casemod
    Buying property for son while living abroad
    • #1
    • 14th Sep 18, 8:14 PM
    Buying property for son while living abroad 14th Sep 18 at 8:14 PM
    My dad is planning to help me out in the property ladder by purchasing a house for me to live. He currently resides overseas.

    A couple of questions that arise: Can he place the house in a trust so that, if anything happens, I can legally stay there/claim ownership?

    I would be paying rent to help with the mortgage until I can get my own. What are the implications to consider, tax wise? I understand there used to be a 10K/Yr exemption, but can't find anything on that matter now.

    Thanks
Page 1
    • Slithery
    • By Slithery 14th Sep 18, 8:33 PM
    • 967 Posts
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    Slithery
    • #2
    • 14th Sep 18, 8:33 PM
    • #2
    • 14th Sep 18, 8:33 PM
    So he isn't purchasing a house for you, he's purchasing a house as a BTL with you as a tenant.

    He will have to abide with all of the rules, regulations and taxes that come with being a landlord, as well as the extra responsibilities that an overseas landlord has.

    Please instruct him to read the following in full and all of the links that it contains before even thinking about becoming a landlord.

    Tenancies in Eng/Wales: Guides for landlords and tenants
    • agrinnall
    • By agrinnall 14th Sep 18, 8:55 PM
    • 21,396 Posts
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    agrinnall
    • #3
    • 14th Sep 18, 8:55 PM
    • #3
    • 14th Sep 18, 8:55 PM
    It'll be much simpler if he just gives you the money and you buy the house yourself (ensuring that you have a good record of the source of the money for when AML checks are done), but of course he then reinquishes any prospect of ownership of the property.
    • steampowered
    • By steampowered 14th Sep 18, 8:59 PM
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    steampowered
    • #4
    • 14th Sep 18, 8:59 PM
    • #4
    • 14th Sep 18, 8:59 PM
    Your dad will need a BTL mortgage with a higher rate and deposit than a homeowner mortgage.

    Your dad may also find that many lenders will not lend if the proposed tenant is a family member of the landlord.

    I think the first thing to do is to speak to a mortgage broker.

    You could indeed set-up a trust with your father as the trustee and you as the beneficiary. However again the mortgage lender is going to have a problem with that. It would be simpler for your dad to write a will leaving the property to you.
    • steampowered
    • By steampowered 14th Sep 18, 9:08 PM
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    steampowered
    • #5
    • 14th Sep 18, 9:08 PM
    • #5
    • 14th Sep 18, 9:08 PM
    What do you mean the 'current mortgage'?

    I read your Op as suggesting that your dad was thinking of buying a property.
    • cts_casemod
    • By cts_casemod 14th Sep 18, 9:19 PM
    • 229 Posts
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    cts_casemod
    • #6
    • 14th Sep 18, 9:19 PM
    • #6
    • 14th Sep 18, 9:19 PM
    It'll be much simpler if he just gives you the money and you buy the house yourself (ensuring that you have a good record of the source of the money for when AML checks are done), but of course he then reinquishes any prospect of ownership of the property.
    Originally posted by agrinnall
    I'm a young professional and I want to protect the house against open risks such as claims from a future spouse or cohabitant. This also applies to the trust, essentially I want the house to remain on my fathers name - The mortgage situation is all sorted.

    What do you mean the 'current mortgage'?

    I read your Op as suggesting that your dad was thinking of buying a property.
    Originally posted by steampowered
    Yes and the mortgage payments would come out to 96/wk so they are below the tax threshold. I suppose he still needs to contact HMRC and have a record of payments, but I can't see a worked out example on the notes, so just making sure.
    Last edited by cts_casemod; 14-09-2018 at 9:21 PM.
    • davidmcn
    • By davidmcn 14th Sep 18, 9:19 PM
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    davidmcn
    • #7
    • 14th Sep 18, 9:19 PM
    • #7
    • 14th Sep 18, 9:19 PM
    What do you mean the 'current mortgage'?
    Originally posted by steampowered
    Those words don't exist anywhere above...
    • cts_casemod
    • By cts_casemod 14th Sep 18, 9:24 PM
    • 229 Posts
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    cts_casemod
    • #8
    • 14th Sep 18, 9:24 PM
    • #8
    • 14th Sep 18, 9:24 PM
    Those words don't exist anywhere above...
    Originally posted by davidmcn
    I edited the post, sorry.
    • Thrugelmir
    • By Thrugelmir 14th Sep 18, 9:59 PM
    • 60,994 Posts
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    Thrugelmir
    • #9
    • 14th Sep 18, 9:59 PM
    • #9
    • 14th Sep 18, 9:59 PM
    I'm a young professional and I want to protect the house against open risks such as claims from a future spouse or cohabitant.
    Originally posted by cts_casemod
    Have you divorced your current wife formally yet?
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • cts_casemod
    • By cts_casemod 14th Sep 18, 10:42 PM
    • 229 Posts
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    cts_casemod
    Have you divorced your current wife formally yet?
    Originally posted by Thrugelmir
    Yes. And once bitten, twice shy.
    • steampowered
    • By steampowered 15th Sep 18, 10:15 AM
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    steampowered
    I'm a young professional and I want to protect the house against open risks such as claims from a future spouse or cohabitant. This also applies to the trust, essentially I want the house to remain on my fathers name - The mortgage situation is all sorted.
    Originally posted by cts_casemod
    This arrangement would not protect you against claims from a future spouse. On divorce a court would see straight through this and would treat the house as your asset (or at least take the house into account when deciding how to divvy up the rest of your assets).

    It would protect you from claims against a co-habitant, but it is very difficult for co-habitants who are not joint owners to make claims anyway.

    Yes and the mortgage payments would come out to 96/wk so they are below the tax threshold. I suppose he still needs to contact HMRC and have a record of payments, but I can't see a worked out example on the notes, so just making sure.
    Your Dad will need a BTL mortgage, which will require a 25% deposit and have a higher rate than the 96/week your paying at the moment.

    Also note that many BTL lenders will not lend if the property is being let to family members.

    If you try to do this on a conventional residential mortgage the risk of being prosecuted for mortgage fraud is a bigger risk than the tax risk.
    • xylophone
    • By xylophone 15th Sep 18, 11:15 AM
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    xylophone
    Your divorce is now final.

    There was no former marital home - you rented as you were so frequently abroad?

    Your non resident parent has arranged a mortgage( from a UK institution?) and is in the process pf buying a property ( which he will own in his sole name) and he will let to you?

    You will pay him rent?

    Your father needs to check on whether his mortgage is a BTL mortgage.

    He will be your landlord.

    https://england.shelter.org.uk/housing_advice/private_renting/landlord_responsibilities

    https://www.gov.uk/guidance/paying-tax-on-rent-to-landlords-abroad
    • cts_casemod
    • By cts_casemod 15th Sep 18, 8:14 PM
    • 229 Posts
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    cts_casemod
    My father will have a mortgage, but not UK based. It will be provided by his own bank and secured on his property. He wont be needing a BTL.

    On that sense, payment terms are between us and having a tenancy was considered just for extra protection on my side (maybe I don't even need it?)

    What I want to understand is whenever the investment and repayment to a foreign bank generate any sort of tax implication (other than stamp duty) and likewise when the property is sold. The rental income will be below the threshold of 100/wk
    • xylophone
    • By xylophone 15th Sep 18, 8:30 PM
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    xylophone
    Your non resident parent is obtaining a loan from a non resident bank and using it to buy a property in the UK.

    He will pay stamp duty as appropriate.

    Presumably he will be making the repayments from his non resident bank account to the non resident lender?


    The property will be in his sole name and you will be living in it.

    He is therefore your landlord and will need to comply with a landlord's responsibilities.

    Re sale

    https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property
    • cts_casemod
    • By cts_casemod 18th Sep 18, 10:39 AM
    • 229 Posts
    • 33 Thanks
    cts_casemod
    Your non resident parent is obtaining a loan from a non resident bank and using it to buy a property in the UK.

    He will pay stamp duty as appropriate.

    Presumably he will be making the repayments from his non resident bank account to the non resident lender?


    The property will be in his sole name and you will be living in it.

    He is therefore your landlord and will need to comply with a landlord's responsibilities.

    Re sale

    https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property
    Originally posted by xylophone
    Would you help me understand what triggers the requirement for him to be a landlord? Is it generated by the mortgage, the law or something else?

    I'm clear regarding the stamp duty and the higher tax on earnings when the property is sold.
    • Slithery
    • By Slithery 18th Sep 18, 10:59 AM
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    Slithery
    You would be paying to live in a property that you don't own, and the owner wouldn't be resident - so you have a landlord/tenant relationship.
    • Pixie5740
    • By Pixie5740 18th Sep 18, 10:59 AM
    • 13,266 Posts
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    Pixie5740
    Would you help me understand what triggers the requirement for him to be a landlord? Is it generated by the mortgage, the law or something else?

    I'm clear regarding the stamp duty and the higher tax on earnings when the property is sold.
    Originally posted by cts_casemod
    You pay money in exchange for exclusive occupation of the property. It doesn't matter if the agreement is in writing or not, if it isn't it will automatically be a Contractual Periodic Tenancy. It doesn't matter what you call the money you pay to him, legally it will be rent.

    This all seems a very complicated way of buying a property and not very tax efficient at all. Setting up a trust or having you as the beneficial owner and your father as the legal owner won't protect you from future divorces because the trust or your beneficial interest will still be your assets.

    Wouldn't it be easier, and more tax efficient, for your father to lend you the money to purchase the property yourself with a private mortgage agreement between the two of you? Then to protect yourself against divorces just don't get married. If you co-habit with someone do not ask them to contribute towards the mortgage payments or material changes to the property such as fitting a new kitchen or funding a loft conversion, or if leasehold don't ask them to contribute towards a lease extension.
    • agrinnall
    • By agrinnall 18th Sep 18, 11:44 AM
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    agrinnall

    Wouldn't it be easier, and more tax efficient, for your father to lend you the money to purchase the property yourself with a private mortgage agreement between the two of you?
    Originally posted by Pixie5740

    That's what I originally thought. But now we know that the OP's father will need a mortgage to buy the property I doubt very much if the lender will allow the money to be handed over to a third party with no security for them.
    • Pixie5740
    • By Pixie5740 18th Sep 18, 12:11 PM
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    Pixie5740
    That's what I originally thought. But now we know that the OP's father will need a mortgage to buy the property I doubt very much if the lender will allow the money to be handed over to a third party with no security for them.
    Originally posted by agrinnall
    I think the father is remortgaging his own house to release equity to then buy the property the OP will live in....at least that's how I read it.

    My father will have a mortgage, but not UK based. It will be provided by his own bank and secured on his property. He wont be needing a BTL.
    Originally posted by cts_casemod
    • bris
    • By bris 18th Sep 18, 12:21 PM
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    bris
    I think the father is remortgaging his own house to release equity to then buy the property the OP will live in....at least that's how I read it.
    Originally posted by Pixie5740
    That would make it a cash purchase and not the way I read it.


    Using your own home as security is common for lenders to want under many different circumstances.
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