elderly parents want to sell house to me - what are the tax implications?

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • elderly parents want to sell house to me - what are the tax implications?

    Both of my parents are now in their 70's.

    Their house is mortgage free and they are wanting to sell it to me and then rent it back from me.

    Their house has a current market value of £150k (based on sales of similar properties). I am happy to pay £150k for the house

    Our plan is to then set up an AST as normal, and I would charge my parents a market rent of £100 per week (based on similar rents on my other btl properties)

    Can anyone clarify the following...

    1. If my parents were taken into care due to poor health at some later date would they have to use their £150k savings (from the sale of the house) to pay for their care?

    2. What tax implications would there be for me as a landlord? (I would declare the rental income on my land/property tax return)

    3.Is it true that HMRC now allow lettings relief of £40k on 'dependant relatives' who have rented from you? (I have recently read this in a members article by James Bailey from property tax portal)

  • #2
    It is very unclear to me why you want to do this - unless to release equity in the house for your parents to live on.You will have to pay tax on the rental income.

    3. Yes. But that is a CGT exemption available when you eventually sell the house, and you have to live in the house at some point. It is not an income tax relief. I think what you may have read about is this:

    http://www.hmrc.gov.uk/cgt/cgt-recent-changes.htm
    The contents of this note are neither advice nor a definitive answer. If you plan to rely on this, you should pay somebody for proper advice.

    Comment


    • #3
      1/. Your action to remove the property from their estate will be ignored by any LA assessment as it is clearly avoidance and they will make the assessment on the full estate value.
      2/. You will be liable for Income Tax on the declared rental profit and CGT on the gain in house prices whilst you were the owner and no PPR Relief.
      3/. I think you have miss-undestood. Letting Relief will not be available as it was never your PPR.

      If one of your parents goes into a home there is no assessment made and they will not attempt to sell the property whilst the spouse continues to live there. If their wills leave 1/2 the house to you and one of them passes away then you own half and again the LA will not sell the house. This is a complex area of property in trust, lifetime interests and the changing laws. You should seek well versed advise on this matter and perhaps read about 'Property Protection Plans' and Discretionary Trusts. Regards Peter

      Dependant relatives allowance is for a person or persons who bought a house as owners but for the dependant relatives to live in. This was granted upto 17th March 1988 from memory.
      Regards Peter

      Comment


      • #4
        >>1/. Your action to remove the property from their estate will be ignored by any LA assessment as it is clearly avoidance and they will make the assessment on the full estate value.

        I don't think there's any avoidance suggested here. Replacing a house with cash is scarcely removing property from the estate, is it?
        The contents of this note are neither advice nor a definitive answer. If you plan to rely on this, you should pay somebody for proper advice.

        Comment


        • #5
          I see what you mean but money walks and gets gifted, the property does not walk and the LA will overturn an action that deprives the estate of value. And they are getting tougher. Regards Peter
          Last edited by TaxationPete; 24-08-2007, 19:26 PM. Reason: Typo

          Comment

          Latest Activity

          Collapse

          • Do I have to pay capitol gains tax?
            globularity
            I am currently living with my parents and have rented my flat out, this is the only property I own, and I lived there 12 years renting and 1 year as an owner. I am happy to move back in if this helps me to not have to pay capitol gains. Just read somewhere if its your principle home theres no capitol...
            17-08-2017, 22:13 PM
          • Reply to Do I have to pay capitol gains tax?
            Gordon999
            1. The calculation of capital gain starts from the date of purchase of your property up to date of your sale date. If you paid 100K and sold for 160K , then your capital gain is 60K. The capital gain during period of living at the property + 18 months after moving away is exempt from capital gains...
            18-08-2017, 15:04 PM
          • Reply to Do I have to pay capitol gains tax?
            jpkeates
            When did you buy it, between what dates did you live in it, rent it out and when do you plan to sell it?
            17-08-2017, 23:10 PM
          • Buying BTL and declaration of trust?
            bhodgkiss
            Hi there

            I'm buying a btl with my partner (not married)

            i believe we can do the mortgage under tenants in common (as opposed to joint tenants), then sign a declaration of trust to adjust the income split 99:1 (instead of 50:50). She's doesn't work.

            Is it that simple...
            17-08-2017, 06:22 AM
          • Reply to Buying BTL and declaration of trust?
            bhodgkiss
            Many thanks, yes I had read the bit about if one of us dies etc.

            Ok we'll go for the standard joint tenancy, as I believe we can simply draw up a document for her to get 100% income anyway from what's been said here (and other threads)
            17-08-2017, 15:45 PM
          • Reply to Buying BTL and declaration of trust?
            jpkeates
            There are other differences between married couples and non-married couples that kick in.
            You need to look at the totality of the situation, not focus on one part of it.

            If you are married and one of you dies, the surviving spouse inherits the deceased's property automatically....
            17-08-2017, 10:55 AM
          • Reply to Buying BTL and declaration of trust?
            bhodgkiss
            Many thanks

            So aside from ownership implications if we ever split up, surely HMRC will be happiest in assessing rental income if we have a tenants in common ownership 99:1?

            Then rental split follows ownership split?

            Also if we get married it'll need to swap to...
            17-08-2017, 09:04 AM
          • Reply to Buying BTL and declaration of trust?
            jpkeates
            Which is why joint tenants is the better route.
            There's no defined split in ownership.

            How the business then arranges its affairs is then, more or less, up to the business.
            17-08-2017, 08:49 AM
          • Reply to Buying BTL and declaration of trust?
            Raju Gajurel
            As you are not married, HMRC will look for the real beneficial ownership of the property. The factors such as who put down the deposit, who receives and spends rent, etc will become important. So, if your partner owns 99% of the house, then there would not be any issue from HMRC. But, this means she...
            17-08-2017, 08:18 AM
          • Reply to Buying BTL and declaration of trust?
            jpkeates
            That's necessary for married couples.

            As unmarried partners you can purchase as joint tenants (which is probably better for you in some other ways) and decide how you split the income.
            You should probably document the income split and both sign it.
            17-08-2017, 08:14 AM
          Working...
          X