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TonyTax
TonyTax, Tax Consultant
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I am selling my house and am gifting £220,000,00 to my daughter

Resolved Question:

I am selling my house and am gifting £220,000,00 to my daughter and grand daughter as a deposit on a property , although I will be living with them in the property , I will not have any claim to it, is this ok or will I be opent to tax implications
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

Leave this with me while I draft my answer. There is a fair amount to get through so please bear with me.
Expert:  TonyTax replied 1 year ago.

I'm back.

Assuming you are selling your principle private residence and it has been your mian home for the entire period of ownership, you will have no CGT to pay on the gain you make.

GIFT WITH RESERVATION OF BENEFIT

If you gifted your house to your daughter but continued to live in it, this would be a gift with reservation of benefit and the seven year countdown for the gift to be excluded from your estate for Inheritance Tax purposes would not begin until you either paid a full market rent to your daughter or you moved out of the house.

PRE-OWNED ASSET TAX

In your situation, you will be moving into a property, the purchase of which will have been partly financed by the gift of cash from you to your daughter. You will, therefore, be caught by the pre owned asset tax whereby, unless you pay your daughter a market rent, you will pay income tax on a sum equal to the market rent unless that rent figure is less than £5,000. As you will be sharing the new property with your daughter, the sum on which you would pay income tax would be reduced proportionately. Take a look at the notes and examples here and here.

You may be able to opt of the Pre Owned Asset Tax charge by electing to leave the gift of money as part of your estate until the perceived benefit ends at which time it will become a potentially exempt transfer and will fall out of your estate for IHT purposes if you live for a further seven years.

I hope this helps but let me know if you have any further questions.

Customer: replied 1 year ago.
please bear with me, if I paid my daughter a market rent for living in the annex which is included in the property this would reduce any tax required, as if I opted out of POAT and did not live 7 years what would then happen regarding the gift.
Expert:  TonyTax replied 1 year ago.
A market rent would help you avoid the POAT.

If you opted out of POAT and did not live for seven years, the value of the gift would remain part of your estate for Inheritance Tax purposes. Depending on the overall size of your estate, the IHT charge on gifts made in the seven years before death may be reduced from year three onwards as you can read here.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15763
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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