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Hi.So long as you have an agreement between you and your daughter drawn up, preferably by a solicitor, setting out the details of the loan including the repayment term then you won't have to pay tax on the capital payments to you by your daughter. In effect, she will be buying the property from you via an interest free loan and that fact should be reflected in the loan agreement.If you loaned your daugher the money to buy the property and she paid you interest, that interest would be taxable income in your hands so any agreement with your daughter must make the nature of the payments she makes to you clear.Unless your daughter is treated as owning the property from day one, then when you give it to her, HMRC will probably argue that you have disposed an asset at its market value and seek to charge Capital Gains Tax even though it could be argued that she had bought it from you over a 20 year period. I suspect the lender won't agree to your daughter's name appearing on the deeds. Since I'm not a property lawyer, it may be worth your while to consult one to see if there is a way that you can avoid being treated as the owner of the property.The interest payments could be seen as gifts by you to your daughter with potential Inheritance Tax implications unless you can argue that they are gifts out of income which do not impact on your lifestyle. Take a look here for more information on gifts out of income.I hope this helps but let me know if you have any further questions.
Many thanks for your really helpful reply.
How would I inform HMRC about the arrangement - just write to my tax office with a copy of the loan agreement?
Just one more query. Does the loan agreement work when the property is still owned by me until the loan has been paid off?
Wouldn't HMRC say that nothing has actually been loaned to my daughter as she is not in possession of anything to repay.
Wouldn't I have to give her the property at the start (which I cannot do under the terms of my mortgage) for that to work?
Are there any examples or HMRC guidance which shows that the capital repayments would not be subject to tax even if I retain ownership?
Many thanks for getting back to me.
I am now planning to draw up a purchase agreement under which my daughter and her husband agree to pay x payments of £y a month and one final payment of £z (in total equivalent to the full cost of the house purchase) after which the house becomes theirs. If at any time before the end they decide to move, the house would be sold and either the amount they have already paid would be returned to them and the agreement cancelled or the full amount would be transferred into the purchase of a new house and the agreement and payments would continue.