Selling property within a family

[whojamaflip]

We have a situation in the family where PIL are wanting to sell a cottage to their dd but are wanting to offer it at a significantly reduced value in lieu of any inheritance at a later date. (talking about a reduction of about 200k on market value!)

Fair enough - but they only own 1/2 the property along with FILs db who has agreed to the sale but with a claw back should sil sell in the future. The property in question is also listed as a business asset for the business my dh is a partner in.

My question is really how legal this is and what problems could it bring ie tax (both capital gains and inheritance) and will it have an effect on the business?

I know this should probably be in money matters but I'm more concerned if its legal or not? and is it going to come back and bite dh

[Collaborate]

They can do what they want with their property. They will need to explain the whole situation to the solicitor though, and make wills at the same time. the brother will need to be separately represented too.

[corygal]

Hang on a minute, collaborate - theoretically PIL can do what they like BUT HMRC may come after the DD for inheritance tax if PIL die within 7 years of the 'sale', and if HMRC suspect that it was sold under value to avoid paying tax.

HMRC can check what it was sold for in seconds, so if I were you whoja, I would see a lawyer.

As for the business - well, if the cottage really is a business asset PIL should be able to leave it to her without tax, if they want to (under BPR, ie business property relief.)

But presumably PIL want to hand it over now, so:

1 - the business will be worth a lot less
2 - I can't see that capital gains is an issue because you are losing money - and you don't pay tax on that (yet),

But - big but - property and tax is a minefield because there are loads of special rules about taxing property, so see an accountant too.

Or a good one who does both.

[whojamaflip]

Thanks for the replies - we have a very good solicitor so will give him a shout on Monday and also see what our accountant thinks as well.

Basically the cottage is still a business asset as it is on part of the farm and has never been separate as it is in a state of poor repair and is unfit to rent out. Its been used up to now as storage for cattle feed etc. Sil wants to buy it to renovate (can't say I blame her - it could be gorgeous!) There is also land which would be sold as part of the deal.

I had something in the back of my mind regarding selling at a loss where HMRC are concerned - if its sold at x but is worth y, they then tax on the y value regardless of what it went for - I hasten to add I am not a property lawyer - but I know FIL would not expect his dd to pick up any tax bill, he would expect the business to cover it and to be perfectly frank, that could be the final nail in the coffin (business is fine - its the money that FIL and his DB are heamorraghing out of it at the minute - but thats a different story )