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Gift of Property

Gift of a property

A friend wishes to gift her son a property which she has previously lived in.     The son lives in it now after she moved out and she has moved out to another property with her partner.     Its a bit of a sad situation as she has been ill,  but expects to live 7 years - but maybe not much longer due to serious illness.   She doesn't want to sell the house and the son is happy to take it on as it is -  it also needs work. 

The house would be put into the son's name mainly so he doesn't have to get a mortgage,   have somewhere to live,   and there are no ties or recall on any monies in the future - the house is his.    But the idea is that the son would pay the mother a monthly amount say £500 to help her with her own bills as she can't work full time anymore.    Basically she is preparing for her early demise ,  it seems,  but needs some money whilst she is still here. 

Is the £500 taxable as an income  for any reason ?  or where would it fall with regards to tax?   It's not rent as she would no longer own the house and not a trust. 

The £500 per month would come out of his normal earned income.  

And  I would expect the value of the transfer to be included in IHT before the 7 years are up,  but are there any other taxes or pitfalls to be aware of. 

The SDLT would be paid on the transfer as it would go through solicitors,  fees, etc.    And yes  when the time comes,  I will direct them to a specific tax accountant but just wondered what initial thoughts were on this .

Edit -  I have not given any advice on the matter as she is a 'friend' and would not act for her. 

Thanks.

 

 

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14th Feb 2019 12:26

Quote:

A friend wishes ...

I think it's a mistake to act as adviser to a friend. Far better that they take they own advice from an unconnected third party accountant.

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14th Feb 2019 12:31

Don't forget about potential capital gains tax as well as the deemed proceeds will be the market value at the date of the gift.

The mother will get main residence relief for the period that she actually lived in the property plus the last 18 months of ownership (based on current rules), which may cover most of the resulting gain.

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14th Feb 2019 15:01

Main areas are:

1. Why is there any SDLT on the transfer? Not sure there would be.
2. What is the CGT on the mother, and are they aware of it?
3. Is the £500 contingent on the gift, and therefore not a gift. is it effectively rent and the mother retains rights to income of the property via a bare trust arrangement, however informal?

This stuff is always messy, your best advice is to get them some advice from a property specialist.

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to ireallyshouldknowthisbut
14th Feb 2019 17:23

If she needs to pay for care home fees in the future the value of the property might be considered under Deprivation of Assets legislation

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to ireallyshouldknowthisbut
14th Feb 2019 17:24

If she needs to pay for care home fees in the future the value of the property might be considered under Deprivation of Assets legislation

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15th Feb 2019 15:01

You need to consider the pre-owned assets tax rules in Sch 15, FA 2004 quite carefully

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