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?


    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 .


      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.


        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% ?.


          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?


            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.


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