Redeeming then moving into BTL jointly owned.

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    Redeeming then moving into BTL jointly owned.

    Hi All

    My sister and I jointly own a BTL with joint mortgage. For various reasons we have not received rental income since ownership and it's been sat vacant. I am now thinking of paying off the mortgage in full and then moving in. We thought about taking her name off the deeds but I assume this would mean her paying CGT on disposal of her share so that doesn't work. As I understand it my sister would effectively be renting out her half of the property to me if I move in. If we then decide to sell the flat at some point in the future only i get to benefit from the PPR relief on my share but she won't. Is there any way round this?

    Thanks
    D

    #2
    How much value has the property gained during the period since purchase with sister ? what is the tax rate on your sister's income ?

    If your sister is locked into a situation of no rental income, she could transfer her 50% interest at "original cost" or "10% below the market" value .

    Comment


      #3
      Thanks Gordon as always. Actually it was me alone that entered into exchange of contracts in Oct 2013 on an off-plan purchase. I wonder if that changes things? There was a schedule of payments that was essentially 20% over 2 years then the remaining 80% on completion. The agreed purchase price was 500k. When it was time to complete in 2016 i needed my sister's income to get the loan approved and hence her name went on the deeds. At that time the property was worth 750k and i guess it's still there now.

      She is a high rate taxpayer.

      Can you elaborate on your suggestion of transferring her share at no cost or 10% below market value? I had a brief chat with an accountant and she didn't mention this although i am yet to give her the full picture.

      Comment


        #4
        For a 40% tax rate payer, there is £11K annual capital gains free allowance and balance of capital gain is charged at 28% rate...

        If your sister's share of capital gain was around £25K level, I thought maybe she could transfer her 50% share to you at cost and not be challenged by the tax office .

        But if based on your valuation at £750K , her share of the capital gain would be £125K which means hmrc would expect to collect £32K tax revenue. So any " transfer done at cost" would be challenged by the Tax Office,.

        As alternative, I suggest you visit 1 or 2 Chartered Surveyors located near to your property ( to discuss possible buy out of sister's share and mention you paid £500K in 2016 . ) and ask what they charge for giving you a market valuation of property based on £25K annual rental income.( or whatever is appropriate ) and if they can declare the value for a half share stake is lower by 10% ?.

        Comment


          #5
          Sorry that last paragraph went over my head! Where does the rental income come into it? Would a surveyor not just look at market comparables in previous 3-6 months? Are you saying I could get a surveyor to mark down my sister's share by 10% because .....because?

          Comment


            #6
            yes - because there is no market price for "half share in a property". It is similar to a situation where the property is occupied by a tenant under controlled rent , the property value is reduced.

            Comment

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