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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My husband and I own a property outright and my parents own

Resolved Question:

My husband and I own a property outright and my parents own another outright. Ours is valued at £750k and theirs £500k. We are looking to sell both properties and move into one larger property probably costing around £1m as my parents are less able to cope alone now.

My parents do not want shared ownership of the new property preferring to put their house sale money to it but for the house to be in our names.

Both houses are just going up for sale and it seems like the appropriate time to seek advice on the various routes forward re: capital gains and inheritance tax so we make an informed decision. My father is in his 80's and my mother late 70's and not at all well.
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

As it is your parents' intention not to have shared ownership the options available are
- their contribution towards the purchase price is treated as a loan to you with a loan agreement in place (with or without a charge on the property). It can be interest free loan.
- their contribution is regarded as a gift to you and it is a potentially exempt transfer for inheritance tax purposes and the seven years rule applies i.e.if they survive for 7 years after making a gift to you, the gift is generally exempt from inheritance tax no matter what the value is.

Provided their joint wealth does not exceed (325,000 x 2) £650,000 on the death of second partner, including gifts made within 7 years of death, there will be no IHT payable.

More information on transferring of unused Inheritance Tax threshold can be found here

http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm


As both of you would be disposing your respective properties that are your main residence, there is no CGT payable on any gain made.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

Thank you for the information above which is very useful - I have only the following question:


 


Their combined wealth will exceed the £650,000 (£325,00 each) but as I understand it from above, even if they do not survive 7 years after the gift, we would only pay IT on anything above the combined £650,000 meaning the property would be 'safe' from IT at all times?


 


 

Expert:  taxadvisor.uk replied 3 years ago.
Billie, thank you for your reply.

As they would not co share the property, it would be safe from IHT at all times.

I hope this is helpful.
Customer: replied 3 years ago.

So sorry, but just to be absolutely clear, even if they do not survive 7 years after they give us the money, we would not pay inheritance tax on the first £325k per parent.


 


Thank you - that's it!!

Expert:  taxadvisor.uk replied 3 years ago.
Billie, you are correct in your understanding.

I hope this is helpful and answers your question..
taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes.
Customer: replied 3 years ago.

Hello- whilst I accepted your answer last night - having reviewed the HMRC website, I do not think it is at all correct as my parents would be moving into the new house with us so pre-owned asset tax looks to me like it would very much apply.


 


I've no idea if you'll answer this given I rated last night but sadly on reviewing the HMRC link you provided, it seems to establish what you told me isn't correct for our situation? Anyway, thank you in case you do see this!

Expert:  taxadvisor.uk replied 3 years ago.
Billie, thank you for your reply.

Your question was referring to cgt and iht implications and I answered accordingly
Would you like me to request a refund for you?
Customer: replied 3 years ago.
I would have anticipated the response would have at minimum touched on the other potential tax given the linkage and overreaching implications as the inheritance tax response in isolation isn't representative and if I had known about the other tax and added 'or any other tax implications' no doubt it would have been included but you can't caviar what you don't know about.

However, if you feel you have provided the correct response then that is I suppose that and I will take another route of advice forward and perhaps not feel as great about using this service as I did.

Many thanks
Expert:  taxadvisor.uk replied 3 years ago.
Billie, thank you for your reply.

Your comments are noted.