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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I own my own house. If I buy another property and put it in

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I own my own house. If I buy another property and put it in my son's name, (ie I buy it for him) would I pay tax on it? After how many years he be able to sell on that property without paying tax? Would I be able to do this one by one for all four of my children?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Who will get the profit from a future disposal of the property or properties?
Customer: replied 2 years ago.

Whoever would pay less tax - I or my son: ultimately the money would go to my children anyway

Expert:  TonyTax replied 2 years ago.
Thanks.

If your intention is to put the properties in your children's names on the understanding that the profits or some of them will come back to you when they are sold, then it won't work for tax purposes I'm afraid.

In order to share in a profit from the sale of a property, you normally have to have an interest in it and the tax office will see through any such circular transaction under the anti-avoidance rules even if your name isn't on the deeds. They will be unlikely to believe that your son gave you some or all of the profit as a pure gift and that it was not related to the original purchase.

A gain from the sale of a property will be exempt from CGT if it is the owner's main home for the entire period of ownership or all but the last 18 months of ownership. The calculations get slightly more complex if a property has been both the owner's main home and let. Take a look at HS283 for more information.

If you buy a property and put it in your son's name but there is a tacit agreement for him to hand back some or all of the profit on sale, then under the Inheritance Tax rules it will be a gift with reservation of benefit and the property will stay as part of your estate for IHT purposes when you die unless the reservation of benefit ends before then and seven years have passed since the end of the reservation. Take a look here for more information on reservations of benefit.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Thanks,

Actually I would not want the profit to come to me. It would be a case of buying a flat for each of my children. I would like clarification on whether I can do this for them without their paying tax on it. How long would they have to live in it before if they could sell that flat (and buy something else)?

Expert:  TonyTax replied 2 years ago.

I apologise for any misunderstanding on my part.

You would be making gifts to each of your children. So long as you live for at least seven years after maiking the gift, its value will not form part of your estate for Inheritance Tax purposes. Take a look here for information on who pays Inheritance Tax.

There is no set time that one has to live in a property for any gain to be exempt, particularly if it is their only home. Theoretically, if one buys a property where the main intention is to make a profit as opposed to making a home, it can be taxable but in practice that will not happen if your children live in any property you buy for them and which is in their names, even if only for a short time. That is, unless there is a discounting scheme or agreement with a builder over multiple purchases for instance. In that case, there may be problems.

As you will read in HS283, the gain for the period that a property is the owner's main home plus the gain for the last 18 months of ownership where it has been the owner's main home will be exempt from CGT.

Customer: replied 2 years ago.

Thanks. So just to clarify once more, if I buy a flat for my son and he lives in it then sells it after, say, a year to buy something else, neither of us would have to pay any tax?

Expert:  TonyTax replied 2 years ago.
That's correct.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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