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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I live in France. I own a cottage in England that I bought

Customer Question

I live in France. I own a cottage in England that I bought 15 years ago. It is on the same piece of land as my mother's home. She would like to gift her home, which she has lived in for over 30 years, and became hers on the death of her partner. I am the only daughter. I would then sell the two houses together to buy a smaller house that she could live in and pay a market rent. Would I have to pay Capital Gains Tax on the sale of the two properties?
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

May I clarify that your question relates to your potential tax liability in the UK please as opposed to any liability you may owe to the French government?

Joshua :

I can outline the position in the UK but not in relation to any liability you may owe in France which would need to be advised upon by a French practitioner.

Joshua :

Would you like to continue on this basis?

JACUSTOMER-5h1x0465- :

Yes. I am resident in France, but I have a UK passport. I don't need to know about anything to do with France!

Joshua :

Thats fine. Thanks. The present position is that if you domiciled in France for tax purposes then you do not pay capital gains tax (CGT) on any property gains you make in the UK in the UK. However that is all about to change...

JACUSTOMER-5h1x0465- :

When is it about to change? And how is it going to change please?

Joshua :

It is proposed that from the next tax year (starting in April) that foreign property owners are subject to CGT in the UK on property they own in the UK. The budget has not yet been announced by the chancellor so the exact terms of the changes are not yet known in full however it is expected that they will be broadly as follows:

Joshua :

It is expected that the chancellor will introduce a charge for foreign domiciled property owners which is the same as that which UK residents are subject to (either 18% or 28% depending on whether they are a higher rate taxpayer or not).

Joshua :

However crucially the tax is only applied to gains (not the whole value of the property) and only gains from April 2015 are proposed to be caught by the new tax.

Joshua :

So if the changes are introduced as anticipated, you would be faced with a situation where you would need to determine the property value as at April 2015 and then pay tax at the above rate on any gain you make between April 2015 and the date you eventually sell.

Joshua :

If it is your intention to sell the property(s) relatively quickly then it is not likely that any significant gains will be made on the properties for capital value between April 2015 and the date you sell.

Joshua :

If you then by another property for your mother to live in you may consider giving her a formal right under a "life interest trust" for her to remain in the property for the rest of her life (if this is your intention). A lawyer could draw up such a trust. If you do this then you will not have to pay any capital gains tax on the eventual sale of that property after her death as an exemption is in place for life interest trusts that avoids CGT.

Joshua :

Is there anything above I can clarify for you?

JACUSTOMER-5h1x0465- :

Yes, firstly I think it is thus in our interest to sell the properties as soon as possible isn't it? We had always intended the two properties to be sold together. And do you know how quickly it takes to gift a property from the start of procedure with the solicitor? Would we have to get a professional valuation of my mother's property first, or could we just give an approximate one? The life interest trust sounds like a very good idea.

Joshua :

As I understand it, your mother owns one property and you own the cottage. Regarding your cottage subject to any suprises in the budget as things stand you will become liable for CGT after April but obviously this does not give rise to an instant liability because it is only for gains made after April. So I would not rush into a panic sale. If however you intend to sell anyway and there are no financial reasons not to sell straighaway you may decide to get on with it for the reasons you suggest.

JACUSTOMER-5h1x0465- :

And do you know how quickly it takes to gift a property from the start of procedure with the solicitor? Would we have to get a professional valuation of my mother's property first, or could we just give an approximate one?

Joshua :

As regards ***** ***** property, if this is her main home then she will pay no CGT on the sale so she can consider simply selling that property in her own time and then gifting you the proceeds of sale (if that is her wish) which may be more sensible because it avoids fees payable on transferring to you and avoids introducing an unnecessary pressure on you to sell.

JACUSTOMER-5h1x0465- :

And do you know how quickly it takes to gift a property from the start of procedure with the solicitor? Would we have to get a professional valuation of my mother's property first, or could we just give an approximate one?

Joshua :

If however she wishes to gift the property to you before sale (though as above I would question whether this is sensible) providing it is in her name and there is no mortgage on the property it can be done very quickly and you needn't delay marketing the property until the transfer is completed as the two if necessary can be done simulateously

Joshua :

For any property that is to be subject to CGT it is worth getting a professional valuation as at April but you can just ask an estate agent to provide this - there should be no fee.

Joshua :

Does the above answer all your questions or is there anything I can clarify or help you with any further?

Joshua :

Do you have any other questions on this or does the above answer everything you needed to know for now?

Joshua :

If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with please reply back to me though

JACUSTOMER-5h1x0465- :

I won't be much longer, but I have a few little questions. Firstly it would be difficult to sell the two properties separately as that is part of the charm of the set-up - two houses on the same property and they are very close to one another. What sort of price are we looking at for a gift of the property? Is it a couple of hundred pounds for creating the instrument to do this? Or would there be other hidden charges?

Joshua :

If it is your and your mothers intention to sell the properties together it can easily be done with the two pieces of land in each of your individual names. You would both have to be parties to one contract under which each of you sell your respective properties.

JACUSTOMER-5h1x0465- :

Secondly how long would it take for the official gift to be made - 3 or 4 days or 3 or 4 weeks, months? What will my mother need to take to her lawyer to start the ball rolling?

Joshua :

It would be no more difficult than each of you and your mother chose to make it - i.e. by cooperating or not cooperating. Providing you are in agreement it is just a simple matter of your solicitor preparing the contract as normal.

Joshua :

If it was decided that your mother makes you a gift then assuming no mortgage and property being in her name as above, it can theoretically be done this afternoon as all that needs to be done is that she signs a transfer. In practice her solicitor will need to set up a file, obtain ID from both of you and prepare the transfer and then register it, so in practice it would take between 1(quick) and 3 weeks(beginning to be on the slow side).

Joshua :

However marketing the property need not wait for the gift to be completed first. You could start marketing the properties as one without delay if this is your wish

Joshua :

Your mother will need to contact her or a solicitor and explain her instructions. If she is not an existing client she will need to produce ID to the solicitor and then sign a transfer deed in due course making the property over to you. Once signed and dated the property is yours. The transfer needs to be registered which would take typically 2-3 days.

Joshua :

FYI if I were the solicitor she approached whilst all of the above is true, I would want to ensure she fully understood what she was doing and explain alternatives to her as giving away her property (no matter who to) is risky for her. Risks: what if something happened to you and your property is inherited by someone else now or in the future; would she have a home etc etc. The solicitor may want to ensure she received full advice before proceeding with the transfer.

Joshua :

In terms of fees, if it is a simple transfer, it would likely cost £2-450 in solicitor fees for the transfer. There would also be a Land Registry fee payable on scale 2 based on the value of the property which can be found here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/409737/REGSERVFees_2_2015.pdf

Joshua :

If you are also instructing the same solicitor on the eventual sale of the property you/your mother can probably negotiate on his fee somewhat.

Joshua :

Is there anything else I can help you with?

JACUSTOMER-5h1x0465- :

Does my mother need to find the deeds of the house to make the transfer?

Joshua :

Providing the property is registered at the land registry she does not need to find deeds as they are held electronically. If you are unsure if it is registered you can check here:

JACUSTOMER-5h1x0465- :

Do you mean £200-£450 or do you mean £2,450 when you speak about the sort of fees we are looking at?

Joshua :

https://www.gov.uk/search-property-information-land-registry

Joshua :

Ref fees yes, £200-450

Joshua :

If the property is not registered at HM Land Registry she will need to track down the deeds as soon as possible.

JACUSTOMER-5h1x0465- :

Thank you. That has all been very helpful indeed. I really appreciated the fact you have thought about the whole problem and gone beyond the questions I asked. Is there anything else I can do for you?

Joshua :

Not at all. I am glad it was of assistance. If you ave any further queries that arise as things progress please do not hesitate to revert to me. If you ave no further questions for now, I should be very grateful if you would kindly take a moment to rate my service to you today.

JACUSTOMER-5h1x0465- :

How could i revert to you if I needed to do so? Yes I will rate your services today. Regards, Gizelle

Joshua :

You can either return to this thread via an email link or through your account page on this site or ask for me in the opening line of any new question.

Joshua :

I will be please to assist if I can.

JACUSTOMER-5h1x0465- :

Ok thanks. I am giving you an Excellent service. Have a good day!

Joshua :

Many thanks. And you

Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
Joshua and 2 other Law Specialists are ready to help you
Customer: replied 2 years ago.

Dear *****, I have another question with regard to my mother's property, adjacent to mine. A French lawyer has suggested she creates an SCI (society civil) which I think is a property investment company, and puts her property into it and sells. That way we could buy it and pay it back over e.g. ten years, 20 years - or however long we wanted. She would be able to live in the property and it would not be considered a gift, but a right we have given her to stay there..... Then when she passes away the unpaid sum to the SCI would pass into her estate and inheritance tax would be based on what was left to pay, which would probably by then be a lot under £325,000.

Expert:  Joshua replied 2 years ago.
Hello. I am afraid whatyyour lawyer is proposed is based in French law in which I have no expertise so I cannot comment. The only thing I would say is that if the property is based in the UK the inheritance tax will be chargeable upon it in the UK if the person owning it passes away.

If her proposal involves transferring it tons French company of some sort that will avoid inheritance tax if your mother were to pass away in the UK but there may be stamp duty payable in the transfer and capital gains tax payable in the UK when the property is sold and finally if your mother is still to keep a benefit in the property inheritance tax may still be charged if it were still owned by the company on her death. I do not suggest all these things would be the case because I don't know what your French lawyer is proposing but checknthwt the French lawyer is able to advise you in the effect of British tax lawyers in her proposal as well in writing before you agree.OOtherwise you could find that her proposal works wonderfully in French law only to find you are clobbered by tax in the UK still because the proposal has not taken account of British tax rules suchbas thise i describe above.

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