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Sam, Accountant
Category: Tax
Satisfied Customers: 14165
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My parents need to release £350000 equity from their house

Customer Question

My parents need to release £350000 equity from their house - valued at £1000000. They would like the option of repaying. They are not able to obtain a mortgage as they are both retired.
We are thinking about transferring ownership of the house to my wife and I in order that we can take out a loan using the house as security. What are the tax implications? - I am aware that inheritance tax will still apply as my parents will still be living there.
However are there capital gains implications for my wife and I? We are not intending to sell the house. Also if in 2-3 years time we transfer ownership back to my parents and then they wish to sell - does CGT apply (if for instance they wait 6 months after transfer)?
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi Thanks for your question - there are three main issues to consider1) Inheritance ta which you have tocked on, and any transfer made will then treat the property as being owned by you and your wife - which means that unless they pay you market value rents - then you have issues with HMRC with pre owned asset tax (and annual charge) as well as this not being treated as a potentially exempt transfer for Inheritance tax purposes.Links here re both of this issues re Pre owned asserts (as they will continue to make full use of a property they have gifted) Potentially exempt transfer this is when after 7 years the gift can be disregarded for Inheritance tax purposes Gift with reservation Then we have the capital gain position - that you will own a property that is not and never has been your main residence, and any increase in value from any future disposal date and the value at the time of the gifting (transfer) will see you and your wife liable for capital gains - and this is because the property and the loan raisd on it will be by virtue of you legally owning the property. the capital gain will be considered when you transfer the property back into the parents names and then they too will have capital gains on any future sale, as there would have been a period of time that exceeds 18 months when this had not been their owned property. Then you also potentially have the new stamp duty regime to consider sure you do not fall foul of the new regimes (an additional 3% charge for second properties) Thats just an overview but do feel free to ask any follow up questions ThanksSam