Property purchase and gifting straight after

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    Property purchase and gifting straight after

    I would be grateful if someone could help whether this is at all legally feasible. My long-term partner and I would like to buy an investment property. We've saved up for a long time and now have funds to make a cash purchase (just under 200K). We already own our own home so would have to pay the higher SDLT. Whilst chatting to the estate agent he sort of suggested a way where we can get round it perfectly legally. As my elderly mother (perfectly fit and healthy) lives with us and she has never owned a property (always rented), he suggested that she could buy it (1st time buyer so no SDLT applies), and then almost immediately gifts it to us both. There will be no CGT for her as the property value hasn't increased in 1day-1week. Non-mortgaged outright property gifts ("without consideration" - legal jargon) do not attract SDLT for the gift recipient (us). We then become legal owners of the house and could potentially take out a Buy-To-Let mortgage against it to release some equity for future investments. The IHT is not an issue as that would be her only asset should she (god forbid) pass within the next 7 years and its well under £325K threshold.

    When I spoke to the solicitor about doing this - he sighed heavily and said that it sounded very complicated. I got the impression that he didn't know whether this was right or wrong or have even come across this situation before.

    Could somebody with tax/legal knowledge advise.

    Many thanks.

    #2
    And how exactly is the mother going to be paid for the gift? Are you planning to give her a gift in return?

    Comment


      #3
      You're going to "gift" your mother £200k.
      She's going to buy a property (which you will select) for £200k and then "gift" it to you.

      As long as noone dies in the next seven years that's probably legal and tax efficient.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        But I guess the question is whether HMRC will see it that way. Because you could do it with almost any transaction to save all sorts of tax (in addition to SDLT).

        Don't get a salary - Work for free and then boss gives you a gift

        Buy a house - why pay for it? The seller will gift it to you, and then you will give them a gift.

        Paying a tradesman to avoid (his) VAT - why bother with the usual type of scam which carries risk. Tradesman works for free. Then give him a gift.

        I think it will be seen by HMRC as a "negotiated transaction" - in much the same way that some barter becomes normal income.

        Further, even if it works the 7 year rule is unlikely to be revoked retrospectively, but IHT rates and threshold can certainly change - let us suppose Corbyn gets in, the country is bankrupt, and the threshold for paying inheritance tax at 90% falls to 100K - there might be a saving of 6K on stamp duty replaced by a hefty inheritance tax bill.

        If OP were to die within 7 years up to 40% of that gift will also be payable to HMRC.

        Of course OP could hide what he is doing, but that is not what we are discussing here. I suspect if HMRC were to be told they would not be impressed. So I think the real answer is for the OP to pass it by them and see what they say of the planned arrangement -- but I suspect he is not planning to do that......

        Comment


          #5
          Thank you for your input and opinions, appreciate it. I've made an appointment with a tax planning accountant to discuss this.

          Comment

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