Cleanandclothed
Thank you for your detailed post.
'They have two houses in joint names.'
Yes
'Was one the house they lived in when they were together?'
Yes 20 years ago
'And does you dad still live there?'
No, he lives in their second home and has done for 20 years.
'They want to move to having 1 house each, but if they each 'gift' the half to the other, they'll have to pay CGT on the half that they receive.'
Yes
'No, that's not quite true, the seller/gifter may need to pay CGT, the purchaser would need to pay stamp duty land tax.'
Okay, but because they are married, they are both the sellers and the gifters i.e. they share everything like any normal married couple.
'So, the idea is that they sell the 2nd small house to me and pays CGT,'
'OK - you need to pay stamp duty (£1,500 on a £150k houese) and you pay half the money to you r mum and half to your dad. As I presume this is a house neither of them have lived in, they both need to pay CGT.'
No, I just pay the money to my dad. He has lived their 20years. 'They' are selling it but I'll just pay him, because they are married I suppose!? He'll pay me the stamp duty so I can pay it.
'he gifts his half of the 1st big house to my mum without CGT as this is allowed.'
'The 'without CGT' bit I think is because this is the house they have as their principal private residence? If he lives in it at present, and has done all the time they owned it then he can give or sell it without CGT, but this is the case whetheer or not he has another house. If he hasn't/doesn't live there, then a sale/gift may well attract CGT anyway. So either this works without you buying the first house, or it doesn't work at all.'
This confuses me a bit. He and my mum have not lived together for 20 years, although they both spend nights at each others houses. They are both in joint names.
'And this leaves your mum with half of the money from the first house, and the whole of the second one. Is she just going to give the money you have paid her back to your dad? If she is, then Quattro is right and the whole thing is likely to be treated as a 'sham' - ie it won't achieve whatever they want it to as the transactions will not be 'true' transactions.'
I'm not going to pay my mum any money at all.
'He is then house-less so buys the house back from me at the same price, so I don't have to pay CGT.
OK, but he will now have to pay stamp duty, another £1,500.'
Yes
'Then he builds and extention on it, and also a granny flat which he lives in whils the sells the now bigger 2nd house and lives on the money as his pension.'
'OK. He may have to pay CGT on this sale.'
Not if it is his primary residence perhaps?
'I think that is it. Mum and Dad are left with a house each and a pension which neither have been saving for because they have put all their money into their houses but were affected by the endowment thingy that went tits-up.'
'There is as I mentioned earlier, a mismatch of where the money ends up, aas you end up with the original £20k gifted, and your mum ends up with a house plus half the proceeds of the other one. So you Dad may not be able to buy the house back. If you both just give the money back to your Dad these are not genuine transactions.'
My mum won't have anything to do with it really. I will end up with the original £20k gifted which I am expected to give back. My mum won't have half the procedes of the one I buy I shouldn't think.
'The only thing this acchieves with any certainty is the requirement to pay at least £3k stamp duty, plus a lot of hassle and risk. Basically your mum and dad need to take advice on the principal private residence relief situation for separated couples. But please don't do this without investigating it a bit more'
Yes I think he was counting on just the £3k plus transation fees.