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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4996
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Just wanting to do tax return and need to get it right,

Resolved Question:

hi just wanting to do tax return and need to get it right, sold my 2nd home to daughter and husband for £77k, purchased for £80k 2 years before, the 77k is on a promisory note, and being paid monthly to me, q 1 is do i need declare the transfer of ownership to hmrc, q 2 can i put the £3k downs as a gift, and do i need declare it, and whom to and how, q3 do i need to declare the monthly income on sef assesment. q 5 is there any cap gains implications, feeling very foolish, am very inexperienced and thought was doing them a favour, someone told me i could have tax implications and am now worried, have tried ringing hmrc severel serveral times and cannot get through, can you please advise. thanks
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Please clarify for me...
You have sold your second home to your daughter and husband for £77k giving you a loss of £3k. You can ignore CGT implication as far as transfer to husband goes as it is regarded as transferred at cost. There may be implications for that part which is transferred to you daughter adn it is covered below

q 1 is do i need declare the transfer of ownership to hmrc,

[a]
You have to declare the resulting gain/loss on the transfer of ownership to HMRC.
Transfers between spouses are tax neutral for CGT purposes. There is no gain or loss resulting from it.
If you sell a property to a connected person at below market value, then HMRC would base the gain/loss on market value.
Please advise market vale of the property at the time of transfer of ownership.

q 2 can i put the £3k downs as a gift, and do i need declare it, and whom to and how,

[a]
You can show £3k down as a gift as one is allowed to give tax free gifts upto £3k to an individual in a tax year for IHT purposes. You don't have to declare it to HMRC.

q3 do i need to declare the monthly income on sef assesment.

[a]
If you are referring to payments to you for the property transferred, then these paymenst are not income (repayment of capital/loan) and you don't have to declare them as monthly income in self assessment.

q 5 is there any cap gains implications, feeling very foolish, am very inexperienced and thought was doing them a favour, someone told me i could have tax implications and am now worried,

[a]
There may be CGT implications if you have transferred ownership to your daughter at below market value. You would be able to claim your capital gains allowance aginst the gain (similar to personal allowance for income tax purposes).

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 2 years ago.

Hi sorry meant to daughter and her husband, bought property at 80k butmarket value was prob 100k the same as when i transferred, i am still on the deeds yet, as have not come off yet, was waiting until they have paid me in full, (hoping they could get mortgage) but daughter gone uni, was only meant to be short term thing, will it matter if was in 13/14 tax year, if i put it on 14/15?return, thanks you are being really helpful,

Expert:  taxadvisor.uk replied 2 years ago.

Jill, thank you for your reply.

For CGT purposes, you would have to work out the gain based on market value of £100k as the sale/transfer is to a connected person.

The gain would be £20k less your gains allowance of £10,900 making it £9,100.
This would attract CGT at 18%, 28% or a combination of two depending on your taxable income in the year of transfer.

Remember to take away from the gain any costs associated with buying and selling the property.

You should declare it in Tax year 13/14 if the transfer took place during the tax year (6 Apr 2013 - 5 Apr 2014). You can make amendments to your tax return for 2013-14 up to 31 Jan 2016 without incurring any penalty.

I hope this is helpful and answers your question.

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Expert:  taxadvisor.uk replied 2 years ago.

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Best wishes.