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  • FIRST POST
    • Mandy humphries
    • By Mandy humphries 16th Apr 19, 7:19 PM
    • 1Posts
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    Mandy humphries
    Trying to buy property off my parents
    • #1
    • 16th Apr 19, 7:19 PM
    Trying to buy property off my parents 16th Apr 19 at 7:19 PM
    Hi Hoping someone could help me

    In 2011 my parents brought a house for me to live in ( at the time I was single and couldn't get a mortgage on my own)I have paid the mortgage payments every month no problem there. The condition always was as much not in writing that i would then go on and buy them out of the house when i was position to do so.

    I am now married and in a position to buy them out.

    The house was brought for 115.000 in 2011 current market value is 165.000.

    We agreed I would buy the house off them for 100,000.

    However now it appears that due to them never living in the house they would have to pay capital gains tax on the 50,000 minus any legal fees etc.

    They want to use the money to pay off there mortgage on there current house would this class as reinvesting?

    any help with really be appreciated
Page 1
    • G_M
    • By G_M 16th Apr 19, 7:46 PM
    • 47,795 Posts
    • 58,463 Thanks
    G_M
    • #2
    • 16th Apr 19, 7:46 PM
    • #2
    • 16th Apr 19, 7:46 PM
    What they do with the money is irrelevant. They have made a capital gain of 50K on a property. They cannot claim private residence relief as they did not live there. They can claim legal fees etc, and use their 11K annual allowance (each) assuming they have not used it elsewhere on any other capital gains (eg selling an investment).


    Off topic a bit, but did their mortgage lender know they were not living there and that you were.......?


    And does HMRC know that they were receiving rental income (in the form of mortgage payments)? This should be declared as income.
    • Edi81
    • By Edi81 16th Apr 19, 8:11 PM
    • 666 Posts
    • 604 Thanks
    Edi81
    • #3
    • 16th Apr 19, 8:11 PM
    • #3
    • 16th Apr 19, 8:11 PM
    Good points G_M.

    The OP may wish to change their username if that’s their real name.
    • babyblade41
    • By babyblade41 16th Apr 19, 8:36 PM
    • 593 Posts
    • 648 Thanks
    babyblade41
    • #4
    • 16th Apr 19, 8:36 PM
    • #4
    • 16th Apr 19, 8:36 PM
    It amazes me how many people go about gifting houses for no return or very little, then wanting some of it back again but for a bit more without seeking professional advice right at the start rather than after the deed has been done !!
    • steampowered
    • By steampowered 16th Apr 19, 10:45 PM
    • 3,134 Posts
    • 3,157 Thanks
    steampowered
    • #5
    • 16th Apr 19, 10:45 PM
    • #5
    • 16th Apr 19, 10:45 PM
    Could you buy them out gradually over several years?

    Might help minimise their capital gains tax bill by using multiple years of their CGT allowance.
    • POPPYOSCAR
    • By POPPYOSCAR 16th Apr 19, 10:45 PM
    • 12,021 Posts
    • 26,249 Thanks
    POPPYOSCAR
    • #6
    • 16th Apr 19, 10:45 PM
    • #6
    • 16th Apr 19, 10:45 PM
    It amazes me how many people go about gifting houses for no return or very little, then wanting some of it back again but for a bit more without seeking professional advice right at the start rather than after the deed has been done !!
    Originally posted by babyblade41
    Who would you recommend for such advice?
    • Edi81
    • By Edi81 17th Apr 19, 6:33 AM
    • 666 Posts
    • 604 Thanks
    Edi81
    • #7
    • 17th Apr 19, 6:33 AM
    • #7
    • 17th Apr 19, 6:33 AM
    A solicitor may be a good shout.
    Even posting on forums like this beforehand would tease out the pitfalls.
    • babyblade41
    • By babyblade41 17th Apr 19, 6:37 AM
    • 593 Posts
    • 648 Thanks
    babyblade41
    • #8
    • 17th Apr 19, 6:37 AM
    • #8
    • 17th Apr 19, 6:37 AM
    Who would you recommend for such advice?
    Originally posted by POPPYOSCAR
    An accountant would have been my first port of call to go through any tax implications , then a solicitor
    • onwards&upwards
    • By onwards&upwards 17th Apr 19, 7:01 AM
    • 216 Posts
    • 410 Thanks
    onwards&upwards
    • #9
    • 17th Apr 19, 7:01 AM
    • #9
    • 17th Apr 19, 7:01 AM
    Why don’t they sell it on the open market then give you a cash gift from some of the proceeds after paying the CGT they owe?
    • middleclassbutpoor
    • By middleclassbutpoor 17th Apr 19, 7:29 AM
    • 612 Posts
    • 550 Thanks
    middleclassbutpoor
    Hi

    Complete the following:

    Current Market Value = A

    Minus

    Purchase costs + buying costs + improvement costs + selling costs = B

    A-B = C- this is your parents gain

    Take C and take away the CGT allowance (assuming no other gains or losses incurred this tax year) given to both your parents which total 24k

    The remaining amount will incur a tax bill of 18% and/or 28% depending on their income.

    As an example 115k plus 2k purchase costs, 1k improvements and 2k selling costs = 120k

    Current market value = 165k

    Gain = 165k- 120k = 45k

    Less allowance of 24k = gain of 21k.

    Assuming that both parents are equal owners this will mean that 10,500 will be added on to their income for them year. If with this added on they remain within the basic rate tax band, they would be liable for an 18% charge on the 10500. If some fell into the higher rate tax band then this would be liable to 28%. If your parent(s) are already higher rate tax payers then all of the gain will attract the 28%.

    Your parents should seek the services of an accountant as the above is a very basic example. There could be other levers that can be pulled to reduce this potentially but an accountant would be best to advise.
    • POPPYOSCAR
    • By POPPYOSCAR 17th Apr 19, 7:40 AM
    • 12,021 Posts
    • 26,249 Thanks
    POPPYOSCAR
    An accountant would have been my first port of call to go through any tax implications , then a solicitor
    Originally posted by babyblade41
    That would depend on the accountant.

    Our accountant always has 'to look into'aspects of CGT. In other words find out from someone else.

    I was just wondering if there is anyone out there who would specialise in this sort of thing.

    Are there solicitors that deal with this?

    Our daughter works for a solicitor firm but they do not deal with things like CGT.
    • Yellow_mango
    • By Yellow_mango 17th Apr 19, 7:50 AM
    • 97 Posts
    • 85 Thanks
    Yellow_mango
    Our accountant always has 'to look into'aspects of CGT. In other words find out from someone else.
    Well it depends how complex or unusual those aspects are. No-one can be expected to know every aspect of complex legislation off the top of their heads to a level that they’re happy for you to rely on.

    On the other hand if this is an accountant you’re paying to complete an individual personal tax return, I’d expect a decent level of familiarity with most common scenarios, even if they want to double check before committing firmly to a view. If this isn’t the case you need a new accountant!

    “Looking into” is most likely reading the legislation and / or the HMRC website rather than asking another accountant.
    • davidmcn
    • By davidmcn 17th Apr 19, 8:35 AM
    • 10,919 Posts
    • 12,025 Thanks
    davidmcn
    That would depend on the accountant.

    Our accountant always has 'to look into'aspects of CGT. In other words find out from someone else.

    I was just wondering if there is anyone out there who would specialise in this sort of thing.

    Are there solicitors that deal with this?

    Our daughter works for a solicitor firm but they do not deal with things like CGT.
    Originally posted by POPPYOSCAR
    There'll be accountants and solicitors with expertise in it, and plenty who don't. If they're in larger firms they'll no doubt have tax expert colleagues whom they can call on.

    And as above, not every professional is going to give you advice off the top of their head - knowing the principles, where to find the exact answers, and how to interpret them, is the skill.
    Last edited by davidmcn; 17-04-2019 at 8:37 AM.
    • spadoosh
    • By spadoosh 17th Apr 19, 8:37 AM
    • 6,547 Posts
    • 9,441 Thanks
    spadoosh
    It amazes me how many people go about gifting houses for no return or very little, then wanting some of it back again but for a bit more without seeking professional advice right at the start rather than after the deed has been done !!
    Originally posted by babyblade41
    Its better to ask forgiveness than permission.
    Don't be angry!
    • davidmcn
    • By davidmcn 17th Apr 19, 8:42 AM
    • 10,919 Posts
    • 12,025 Thanks
    davidmcn
    Could you buy them out gradually over several years?
    Originally posted by steampowered
    Can't see how you'd do that if both parties need mortgages.
    • Albala
    • By Albala 17th Apr 19, 9:14 AM
    • 39 Posts
    • 42 Thanks
    Albala
    There is a yearly allowance for capital gains. And if they bought in joint names, presumably that's each. But you need to get proper advice.
    When it comes to tax, I would never agree that it's better to ask forgiveness than permission, and I suspect that HMRC would be with me on that one. You need to get it right, so take professional advice. You could also ring HMRC- they cannot advise, but they can tell you what the rules are. It can take a long time to get through, but most times I've rung them they have been pretty good once I have got through. If you call, it will go on file.
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