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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 8718
Experience:  I have been practising for 30 years.
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We have sold our house and are moving in with my elderly father

Customer Question

We have sold our house and are moving in with my elderly father to look after him. we are lending him money from the sale of our house to have an annex built for him. we sort advice and were told that we could purchase the house from him however don't think this is going to work as he still needs to be on the deeds. We don't want to be seen to be breaking any laws like avoiding paying iht or him having to pay capital grains tax but we could now it seems end up homeless please help
Submitted: 9 months ago.
Category: Law
Expert:  F E Smith replied 9 months ago.
What exactly is your concern about this? Why does he need to remain on the deeds?
Customer: replied 9 months ago.
The price we will pay will be under market value and isn't that seen as a gift
Customer: replied 9 months ago.
But really there is know option as he cant look after himself anymore
Expert:  F E Smith replied 9 months ago.
If he just transfers the house to you and he then survives for 7 years, there is no inheritance tax to pay.For the first two years full inheritance tax will be payable on his death and then on a sliding scale for the next five years down to 0. That only applies if he literally gives the house away to you at no value and he retains no interest.If he transferred the house to you for whatever price and dies in another 10 years but in the interim, although the property was in your name, he continued to live in it, it is called a gift with reservation which is classed as a “sham gift” which is not a gift at all and therefore discounted for the purposes of inheritance tax. Inheritance tax would be payable in that case.As he is continuing to benefit from part of it, by living in the property there is inheritance act going to be payable on the part which he has in effect retained by contributing to the house.However, if your mother has already passed away and her nil rate band has not been used up, there is already her exemption of £325,000 which can be used to offset against inheritance tax and then, when your father eventually dies, another £325,000 which means that your father’s estate including the value in the house would be £650,000 before there would be any tax payable.Can I assist further with this?Please don’t forget to rate the service positiveBest regardsFES
F E Smith, Advocate
Category: Law
Satisfied Customers: 8718
Experience: I have been practising for 30 years.
F E Smith and 2 other Law Specialists are ready to help you
Customer: replied 9 months ago.
if we paid him for our part in the property will he have to pay any capital grains tax. Thank you for your help so far.
Expert:  F E Smith replied 9 months ago.
Not if it has been his main or only home which it will be
Customer: replied 9 months ago.
thank you very much for your help you have put my mind at rest.
Expert:  F E Smith replied 9 months ago.
my pleasure

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