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Clare
Clare, Solicitor
Category: Law
Satisfied Customers: 33801
Experience:  I have been a solicitor in High Street Practice since 1985 with a wide general experience.
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Question concerning transfer of ownership of land property

Resolved Question:

Question concerning transfer of ownership of land property in UK.
I (83 years old British citizen, retired) want my nephew (51 years old Polish citizen living in Poland, having the same name as myself) to became the legal owner (or preferably joint owner) of my property in London. I am a landowner (freehold of a house consisting of two flats, one of them leased off for remaining 95 years). Validations of that property made only two years ago quoted between 375,000 and 445,000 British pounds.
The Question:
What is the most tax efficient (or most simple) way to let him to be registered at the Land Registry either as freeholder - instead of me, or as a joint owner with me?
I thought about following options:
1. last will - but only as a last resort (inheritance tax). I prefer to get it done contemporarily.
2. gift - I can not be sure to survive another seven years. required by tax .
3. selling
A: in conventional way but only a small percentage of ownership allowing him to became a legal joint owner. Proverbial “one pound” transaction?
B: by lending him a money to buy it from me (i.e. giving him a private mortgage) only as a set of proper legal paperwork, without necessity to proof of exchange any real money).. I believe that joint ownership could involve much lower worth of that virtual transaction.
4. Visiting Land Registry together with our identity documents and written request for change to be done? Somehow I believe that this, the most simple way, is much too simple to be allowed..
What is you opinion? Are there any pitfalls in my thinking? Are there other or/better ways available?
Sincerely yours
Jerzy Knabe London, 15 May 2016
Submitted: 10 months ago.
Category: Law
Expert:  Clare replied 10 months ago.

Thank you for your question

My name is ***** *****

I shall do my best to help you but I need some further information first

I assume that you are trying to avoid any Tax liability at all?

Customer: replied 10 months ago.
Is that not obvious? Yes, I am trying to find a way most favourable for myself. As far as it is possible and legal. JK
Expert:  Clare replied 10 months ago.

Sadly as you guessed the final option is not available!

What is the total value of your estate (round figures)

Customer: replied 10 months ago.
Ca 400 thousands GBP
Please re-read the first akapit of my initial inquiry:I(83 years old British citizen, retired) want my nephew (51 years old Polish citizen living in Poland, having the same name as myself) to became the legal owner (or preferably joint owner) of my property in London. I am a landowner (freehold of a house consisting of two flats, one of them leased off for remaining 95 years). Validations of that property made only two years ago quoted between 375,000 and 445,000 British pounds.
Expert:  Clare replied 10 months ago.

My apologies I was not sure that this was your ONLY asset

The most efficient way of dealing with this is to transfer one of the properties into joint names gifting your nephew half of the property.

This would reduce your Estate to below the IHT level.

I appreciate that if you do not live for 7 years there is a problem BUT there is a taper involved after the first three years which could well ensure that no IHT is payable.

Any other option would not achieve any better result since even the "purchase" option would not stand up to scrutiny.

Accordingly you only need to complete and sign the necessary conveyancing forms.

Please ask if you need further details

Clare

Customer: replied 10 months ago.
Thank you! Please clarify for me:1. What it is a 'taper" and how that could do any good after 3 years? What happens in case I die within initial 3 years?
2. After 'gift' , is it not possible that Land Registry will insist on calling the case as owning 'in common' instead of owning 'jointly?
3.Why and when there could be scrutiny, and by whom? Is such a sale 'for 1 pound' illegal? Or it is legal, nevertheless the taxman would question it and demand tax according to the market value anyway? Would then selling e.g. of 5% of property would be not enough to make my nephew a joint owner? Is there any limit for that purpose? 25% ? 50% ?
4. There is a legal animal called 'Trust'. Employing that could do any good in my case? My nephew has two sons. And he himself is a sole family member in line for inheritance. My parents and siblings are all dead. I nave no children.
Sincerely JK
Expert:  Clare replied 10 months ago.

1. Taper relief is described here

https://www.gov.uk/inheritance-tax/gifts

IF you die within the first three years I am afraid that there is no way around this

2. This is a decision made by the owners of the property - it cannot be imposed

3. After your death your Executors will have to account for any monies given to anyone in the seven years prior to your death - including and loans so there would be no benefit

4. Creating a Trust would be a more expensive way of doing it

Customer: replied 10 months ago.
Following is submitted for second time:Repeating p.3 in our last exchange; it was left without answer:
Sharing property 95% to 5% can be regarded as joint ownership or are there some rules preventing that? E.g. selling to my nephew 5% (or less) and registering in Land Registry as a joint ownership?
Regarding p.4
More expensive than what? "It" can be any of options discussed until now...
BTW: My ex-wifes are either dead or divorced, so they are not in the picture.
Having all what was already said - what is your final advice?
Thanks in advance
Sincerely ***** *****
Expert:  Clare replied 10 months ago.

You can sell your nephew whatever percentage you wish - the Land Registry has no limits on this.

Creating a Trust is more expensive tan risking your not living for seven years after the Transfer

Customer: replied 10 months ago.
Dear Clare,
Sorry, but it seems that you are avoiding giving me the clear answer. The crucial question is now :
After buying 5% of property and registering the sale in Land Registry - my nephew became the joint owner of the property. Is that enough to became the sole owner after my death without any objections from The Tax Office? Or any other direction? BTW: My nephew is also going to be the beneficiary of the property in my last will. Or, as I read somewhere, the joint property should not be mentioned at all in the last will?
JK
Expert:  Clare replied 10 months ago.

The Will will indeed pass to your nephew outside of the Will.

However since he is not your spouse your share of the value will still count towards Inheritance Tax

Customer: replied 10 months ago.
1. Hm... "The Will will indeed pass to your nephew outside of the Will". (?) A bit confusing statement.
Did you mean: 'The PROPERTY will indeed pass to your nephew outside of the Will..."?
2. Tell me please how my property would be seen legally - as one or as two properties? As I mentioned before I am a landowner for the whole building. One flat is on a longterm lease to somebody else. So it does not count now as my property, Am I right? The second flat is now leased by myself - as a landlord, to myself - as a leaseholder for 95 remaining years. So legally - do I have one property or two?
3. How does it impact on a gift giving? I presume that I should give half of both properties as they are of a quite different worth and are very far from 50/50% , or even 30/70%.
4. I presume that the act of giving is documented by a solicitor, the same professional who would be drafting a normal conveyance action. Am I right? And depending of the answer to point 2. - it would be one or two documents prepared for registering at The Land Registry?
5. The documents most probably quote the worth of the gift. Is that matter for decision between gift donor and recipient or for solicitor or the special valuation done strictly for that purpose by a third party?
6. Does the dealings in solicitors office require the personal presence of giftt taker or I can do it myself and arrange for his signature later by post? Perhaps his personal letter accepting the gift in advance can be helpful?
I presented now a lot of questions but I understood that you are prepared for that. I feel that our consultations are coming to the end soon. Thaks in advance, regards *****
Expert:  Clare replied 10 months ago.

My apologies - I did indeed mean the Property will pass outside of your Will

2. You currently own one property - and the freehold of them both

3. Since the freehold has relatively little value it would be more sensible to simply transfer the flat into joint names

4. You can deal with the TR1 and the APP1 yourself if you wish - or get a solicitor to deal with it

5. There will need to be a valuation for the Land Registry

6. The TR1 can be sent to your nephew for signature

Clare, Solicitor
Category: Law
Satisfied Customers: 33801
Experience: I have been a solicitor in High Street Practice since 1985 with a wide general experience.
Clare and other Law Specialists are ready to help you
Customer: replied 9 months ago.
JK 2/06/20161.The valuation of property: Who can or should be doing it to ensure that is accepted by Land Registry? How recent it must be? Would the valuation by estate agent two years ago be still acceptable? Or can I do it myself on the basis of current adverts in the internet or newspapers?2. Form APP1 does not seem usable in my case. Did you mean form AP1?3. Are you sure that form TR1 is appropriate in my case (joint owners)? It says about transfer of whole registered property... Does it mean transfer of whole property from sole owner to joint owners?These are, I hope, my last questions. Thank you for the whole cooperation.
Sincerely *****
Expert:  Clare replied 9 months ago.

1. By all means use Zoopla or something similar

2. My apologies - it is indeed the AP1

3. Yes that is correct - you are transferring the whole from one owner to two!

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