How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Nicola-mod Your Own Question
Nicola-mod, Moderator
Category: Tax
Satisfied Customers: 21
Experience:  Moderator
Type Your Tax Question Here...
Nicola-mod is online now

My daughter lives in the UK and is a UK resident, born and

Customer Question

My daughter lives in the UK and is a UK resident, born and brought up in the UK by British parents. I have recently moved to live in France and want to transfer my house into her name. What are the tax implications for her if I do this? There will be no rent payable to her as I shall retain the right to live in the home rent free. I shall of course pay all French local taxes etc. She is studying law at the moment and is renting a flat in London. In a couple of years we hope she will be able to have her own place with a mortgage. I would appreciate your advice regarding the UK tax rules. Clare XXXXX

Submitted: 4 years ago.
Category: Tax
Expert:  TonyTax replied 4 years ago.

If you give your UK home to your daughter there should be no UK Capital Gains Tax to pay so long as it has been your main home for the entire period of ownership and is sold or given away within three years of your moving to another home. Take a look at HS283 for more information on the main residence and CGT.

The gift of the house to your daughter will be a potentially exempt transfer for Inheritance Tax purposes which would normally mean that its value would fall out of your estate so long as you survive seven years from the date of the gift. However, if you retain the right to live in the property rent free, it will be a gift with reservation of benefit and so the house will remain part of your estate for IHT purposes until seven years after the reservation of benefit ceases notwithstanding the fact that it will be owned by your daughter. So, there is the possibility of your daughter having to sell the house after you die if your estate does not have enough cash or assets to pay an Inheritance Tax liability should your estate be worth more than the IHT threshold of £325,000 or up to £650,000 if you are widowed at the time of your passing and your late husband did not use his IHT nil-rate band.

Take a look here and here for some information on the reservation of benefit rules, here on who pays Inheritance Tax and here on the transfer of an IHT nil-rate band. The only way around this would be to pay a full market rent to your daughter.

I hope this helps but let me know if you have any further questions.
Customer: replied 4 years ago.
The house is in France and not the UK. I no longer have a house in the UK. However my daughter lives in the UK while I live in France.

All my property and belongings are being left to my daughter (by my previous marriage) on my death (I have both French and English Wills). However because I have recently re-married, my new husband will have a right to stay in my house which will then be owned by my daughter, should I die first. They are both aware. However as all my property etc will belong to my daughter, he will not own any of it.

I am thinking of changing my house in France into my daughter's name as I have been advised by a French Notaire that it is more tax efficient in France and it is what the French do. However as she is English and living in England, subject to English tax laws, the situation is different from the French situation! There will be no rent to tax but won't it be classified as a second home for HER tax purposes?? Even though she won't be living in it?

Thank you.
Expert:  TonyTax replied 4 years ago.

So long as you are UK domiciled, the gift of the French house will still be subject to the reservation of benefit rules for UK Inheritance Tax purposes if you continue to live in it.

As far as your daughter is concerned, the fact that she has a second home will not impact on her UK income tax situation so long as he receives no rental income for it. If she sold it for more than its value when it is gifted to her, she may have to pay UK Capital Gains Tax.

She could make an election for the French home to be treated as her main residence within two years of acquiring it for CGT purposes even though she owns no property in the UK but she would need to actually spend some time living in it for such an election to work. If it does, then any profit she makes from a sale would in theory be exempt from CGT so long as the property is classed as her main home.

The tax office may challenge the main residence claim later on if your daughter sells the property and claims some tax exemption because you and your husband will have retained the right to live in it after gifting it to her.

Customer: replied 4 years ago.

Thank you. However, I am a French resident now as my home is in France and I live here for more than 52 weeks a year. What, then, is the situation for my daughter in this case? Clare XXXXX

Expert:  TonyTax replied 4 years ago.
I'm not sure what you are getting at. Can you elaborate a little please. Are you referring to your domicile?
Customer: replied 4 years ago.
Yes, my domicile is France, therefore your response referring to me being UK domiciled is not relevant. What is the situation where I am domiciled in France?
Expert:  TonyTax replied 4 years ago.
I'm afraid that you don't lose your UK domicile simply by living outside the UK. You will be UK non-resident so long as you stay within the criteria for that which you can read about here but domicile is a different thing altogether. If you lose your UK domicile, when you die, your UK estate for IHT purposes will comprise of your UK based assets only if you have any.

Take a look at section 4 of HMRC6 here which explains what domicile means and how you can change it. I'm afraid its not simply a matter of informing HMRC that you are no longer UK domiciled. They will not acknowledge that you are. The proof is in your behaviour and in many cases, there have been arguments post death between executors of individuals who assumed they were no longer UK domiciled and the tax office.
Customer: replied 4 years ago.

How complicated can things get!!! I intend to return to the UK before too long - I shall look at the references you have given me, so many thanks. It still doesn't help me with my original query about whether my daughter will have to include the French house in her tax return and what implications it will have on her. I know that the French system involves much less tax if I do put the house in France in her name.but I just wanted to be clear about the UK side of things re tax. I shall look at the references you have given. Thank you Clare XXXXX

Expert:  TonyTax replied 4 years ago.
Your daughter won't need to mention the French property in her UK tax return unless she gets income from it. Many UK nationals have overseas property that is for their private use and doesn't produce any income so there is no need to tell the tax office about it.

Let me know if there is anything you are unsure of as far as your own situation is concerned when you have looked at the references I have given you.
Expert:  Nicola-mod replied 4 years ago.

Just a quick reminder, there is an unrated answer waiting for you here from the Professional.

If the Expert was helpful, rating their answer as satisfactory transfers your deposit to them – this is how the Expert is compensated.

To rate your answer, you can go to your question page, and click one of the five faces below the Expert's answer. Please be sure you are logged in with your username and password XXXXX you will not be able to view or rate your answer.

If you still need help with your question, please feel free to reply to the Expert on this question page. You may ask as many follow-up questions on the same question page as you need until you are satisfied.

Thank you,