If my father 'sold' me his house for very little....

[LittleMissRayofHope]

If my dad decided to sell me his house for a small sum, how legal is this?

His house is worth around £350-400k. I have small savings. Less then 20k.
If he were to sell it to me for £100, so I would still have to obtain a mortgage.
How legal is that?

On the surface it seems completely fine but will the 'lost value' be viewed as gifting and therefore require a taxation?

He had to live 7 years after the transaction to not attract inheritance tax

He has to.

Buy him some vitamins

And he can't go bankrupt, if that is a possibility! If he does, the transaction could be reversed.

So as long as he lives for 7 years after the sale then he could sell it to me for whatever price he likes?
He is likely to live for quite some time!!
Such a strange law!

Bankruptcy not a worry. He isn't a wealthy man but quite frugal.

Thanks. Something to investigate further.

How low could the price go before it would be deemed 'given away'?

It will affect future value of the house though surely as it will be recorded as being worth £100.

He can sell it to you for a &1, in fact he can give it you - but he still has to survive 7 years

It won't affect future value of the house

If he is likely to need care within that time, social services may view it as deliberate deprivation of assets.

Where would he live?

Future value is determined by the market and equivalent properties, not what it was last sold for.

It's not to avoid a divorce payout or similar?

I wondered that Party.
Another question to ask a professional I think.

He's wanting to help me out as much as he can with getting on property ladder and avoid any inheritance tax if he can in the future and this seemed a good idea but I'm betting it's riddled with loop holes and obstacles.

It's not riddled with obstacles, it's very simple and is clearly explained on the Hmrc website

He lives with his partner and rents the property.

It isn't to avoid anything in the immediate future. Ultimately he wants to avoid inheritance tax but otherwise it genuinely is to help me get a foot up and onto property ladder.

www.gov.uk/inheritance-tax/overview

Deprivation of assets is the one that would worry me. The capital gains tax thing is clear cut, if he survives your fine, if he doesn't you'll have to pay up.

Not sure how far back social services would delve though if the need arose...

You might get caught by deprivation of assets

www.which.co.uk/elderly-care/financing-care/gifting-assets/343063-what-are-the-rules-for-gifting-assets

There aren't really any loopholes other than what other people have said. The reason people don't do is that they don't generally want to be on the streets before they're dead. Where's your dad planning on living?

X-post!!!

What about the Stamp Duty that is avoided due to the sale below market value? Does this matter?

If it isn't his principal private residence he may have to pay capital gains on part of the sale and this would be calculated at market value not what you paid.

Along with the potential iht issues I would make sure you get formal advice.

www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS40_deprivation_of_assets_in_the_means_test_for_care_home_provision_fcs.pdf?dtrk=true

Deprivation of assets fact sheet - case law suggests on that sheet that it's ok after a year - case law can always change though and indeed it could have since that fact sheet

Yes - the transfer would be deemed at the market value, and your father would be making a potentially exempt transfer. This means that if he dies within 7 years of making the gift, inheritance tax would become due. But would be payable on the market value less anything you paid towards the property. If the market value is £400k, and you paid £100k, and there is no other inheritance, the value of £300k would be covered by the inheritance tax threshold of £325k and therefore no tax should be due.
You Will need to ensure that your father retains no interest in the property. Ie you can't let him live in the property without him paying a market rent to you. You can't recompense him for the cheap property! by eg paying him a monthly sum.
This would have to be his main residence - The tax implicacations are very different if this is an investment property. My tax knowledge is somewhat rusty though and I would seek professional advice if you want to do this.
Where would your father live if he gifts the property to you?

My Dad sold the house he owned which was rented by my Nan after she passed away. It was worth approx 100,000 and we bought it for 60,000. He did it to help us. He was not made homeless in the process or anything. We had to declare it as "transaction under value". It was all through solicitors and above board. It is possible OP but get some advice.

First thing I found on HMRC is that about capital gains and says work out your gain if you sold it for less then it's worth to help the buyer....

Lost me already. should probably read the whole section

He lives with his partner and has no financial interest in his partners property.
He has been living there and privately renting out his property for at least 4/5 years now.

Thanks Fairy, those links are useful

Damn - mumsneters are quick, and I need to refresh before I post an answer