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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4985
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am a 50% owner of a property with my parents. My parents

Customer Question

I am a 50% owner of a property with my parents. My parents currently live at the premises and I own another house elsewhere. The property is mortgage free.
We plan to develop the shared property - by building a new house for me and my family to live in and to build a detached annex for my parents to live in.
In order that I may raise the necessary mortgage against the property (after selling my current home) my parents are happy to gift their 50% share to me.
What are the tax implications of this transaction?
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.

Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your question..

Please clarify for me... will the new development be in joint names with your parents?

what happens to the property you own 50% with your parents?

Many thanks

Customer: replied 1 year ago.
The property that is currently owned 50/50 with my parents will become 100% owned by me - they will transfer their share to me as a gift (no monies will exchange hands). They will continue to live at the property (in the annex that I will build) & I will move to the property also once I have the house built.The house that I currently live in separate to the property in question will be sold to fund the build.
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply.

I need some clarification please..

You say they will continue to live in the property (in the annex that I will build) after transfer of their share to you.

Where is this new build property and detached annex taking place ..in the grounds on the present property or elsewhere?

Many thanks

Customer: replied 1 year ago.
In the same grounds - it will be one address only. Annex is part of the main house development. Part of the planning conditions means it can not be sold as a separate property in the future.
Expert:  taxadvisor.uk replied 1 year ago.

Thank you for your reply.

You say your parents are happy to gift you their 50% share of the property they live in and you own the other 50%.

As this is their main residence and only property, any gain they make on transfer of share would be exempt from capital gains tax as it is covered in full by private residence relief. For CGT purposes, the value of the gift would be based on the current market value of the property and not the cost when it was first purchased.

It is clear from your postings that they would move into the detached annex to the new property that would be built in the grounds of the current property.

You should be mindful of the fact that this gift is deemed a potentially exempt transfer for inheritance tax purposes and the seven year rule would apply to the gift. If there were to survive for 7 full years from the date of gift then the gift is out of scope of IHT.

More information on this can be found here

https://www.gov.uk/inheritance-tax/passing-on-home

You as a recipient of the gift would receive it tax free as there is no taxation on gifts in the UK.

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.