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Giving dc a property

(15 Posts)
concertplayer Thu 19-May-16 20:46:28

My cousin has owned a property for 15 years She wants to put it
in DC name - to be lived in or possibly let out Is it correct that
so long as the parent lives at least 7 years there will be no taxes
to be paid when DC sells it?

AlpacaLypse Thu 19-May-16 20:49:47

Very roughly, yes. She needs to give it absolutely with no strings attached to the beneficiary. The rule was designed to stop the senior generation 'gifting' the family home to a child, while continuing to live in it. However, by the sound of it your cousin doesn't intend to do this.

Hopefully someone who actually has legal qualifications will come along soon and clarify though!

LIZS Thu 19-May-16 20:51:51

That works for inheritance tax but there may still be capital gains tax when it is sold, on the difference between the value at the time of the gift and the eventual sale price. There are annual allowances to offset and the period it is owner occupied may be excluded as long as specific conditions are met. CGT is a specialist area and the criteria and allowances are often reviewed.

concertplayer Thu 19-May-16 22:36:02

So basically so long as it under the Inheritance tax threshold it is
just easier to wait until death of parents.
Otherwise it needs to be owner occupied or let to reduce CGT
because it could count as dc second home.
I presume it will be Dc not parents paying CGT as Dc the owner.

LIZS Fri 20-May-16 07:10:16

CGT would come into play in either scenario. The difference would be the value at the point it changed ownership. You are permitted to gift so much each year to relatives tax free too. The IHT issue is if the person gifting dies within 7 years its value is treated as still part of their estate, but if the total value of assets is within IHT allowances (325k) anyway it wouldn't matter.

OneEpisode Fri 20-May-16 07:16:33

Capital gains tax is calculated on the difference between the value when the property is given and the eventual sale price. There are reliefs. For instance there is an exemption completely if the house is the dc's only home throughout. There's different rules if the property is rented out.

firesidechat Fri 20-May-16 07:21:58

How old is she? Look up deprivation of assets.

Ireallydontseewhy Fri 20-May-16 07:23:21

Would there also be cgt payable by parent when the property is transferred to the dc - if parent is not the owner occupier? Because it is a disposal. (I thought so - but may be wrong!)

concertplayer Fri 20-May-16 08:36:07

So if Dc lives there and it is only home should be ok

LIZS Fri 20-May-16 08:49:17

Depends how long they own it for but generally speaking yes. It has to be their principal primary residence. CGT would only be an issue if the property value increased anyway. If it is rented out you get into paying tax on the rental income as well.

Collaborate Fri 20-May-16 09:09:57

Ireallydontseewhy - correct. There would be CGT payable when the property is transferred to the children (I am assuming here that the property is not the owner's principal private residence). It matters not that it will be a gift. CGT is calculated on the market value of the property where there is a gift or a sale at an undervalue. OP's cousin will have to pay the CGT bill, and cannot defer it.

If they wait until their death and live it in their will there will be a CGT-free uplift in to the estate.

If the cousin lives in the property and remains there they will have to pay market rent to the new owners to avoid further adverse tax consequences.

So, it's not the wise thing to be doing unless they take some proper tax advice.

Ireallydontseewhy Fri 20-May-16 19:12:29

So collaborate as i understand it you could end up with donor (ie the dps in this case, if th dps don't live in the house) paying cgt on the increase in value when they give it to the son; and then if donor dies within 7 yrs of the gift there will also be iht to pay by the donee? Whereas if you wait until death there is only iht. I suppose that to somextent counters the tax advantage of lifetime transfers?

Warning to op and all others - i know very little about this, so plse don't rely on anything i post!

ExtremelyConfidential Fri 20-May-16 19:27:17

Think under UK law a minor (under 18) cannot actually legally own real estate at all. They can theoretically be named as sole beneficiary in a trust structure converting to ownership when they cease to be a minor, but in the meantime legal ownership and all tax liabilities to HMRC remain with an adult.

Ireallydontseewhy Fri 20-May-16 20:08:12

Yes i think i have read that as well about minors. But if you make them sole beneficiary of the trust is that a transfer for inheritance tax purposes - so if you survive 7 yrs there is no iht to pay?

Mind you in this case the dc may well be an adult!

Collaborate Fri 20-May-16 20:53:50

So collaborate as i understand it you could end up with donor (ie the dps in this case, if th dps don't live in the house) paying cgt on the increase in value when they give it to the son; and then if donor dies within 7 yrs of the gift there will also be iht to pay by the donee? Whereas if you wait until death there is only iht.

That's correct. Proper professional tax advice should be taken before OP considers this further.

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