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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 14350
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I purchased a house (main residence) in 2009 with the help

Customer Question

Hi there, I purchased a house (main residence) in 2009 with the help of my mother (who stayed on as a registered co-owner of the property) but she never lived with me. She had her own property throughout this time and has recently paid her own mortgage off. The property cost around £110k and is now worth approximately £230k in 2018.My question is:-I have been able to ave my own mortgage for a while now but couldn't understand the process of transfer of equity, if Capital Gains Tax is due for my mother and if a solicitor is required for any process (i.e. gifting her half of the property to me).I don't know how HMRC views it but my suspicion is something like, this was her second home (although she never took an income from it or contributed to any mortgage payments). I just need the easiest way to take sole control of the property under one name and apply for a new mortgage as soon as possible as living with a Variable rate for nearly 10 years has probably not been the best move.Can we just process a transfer of equity (TR1) online with/without a solicitor and my mother relinquish her legal share of the property without potential CGT of maybe £7k+?I hope that scenario makes sense but should you need further clarification, please let me know. Any help appreciated.
Submitted: 6 days ago.
Category: Tax
Expert:  Sam replied 6 days ago.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

Expert:  Sam replied 6 days ago.

Hi

Thanks for your question

Yes capital gains will be due on your mother as she was co-owner of a property that she never lived at - (so the difference in value at time of transfer less the purchase price x her share of the property) and there is no need for further legal intervention other than the legal change to the deeds will take place during your re- mortgage arrangements and your mother arranging for a written document to be created detailing the gift the date and the value (not needed to be legally created) so that should she not survive more than 7 years from the date of making the gift - that is can be considered for Inheritance tax purposes

If you remortgage then you cannot simply complete TR1 online as the mortgage company also own the property so the deeds have to legalised as part of that transaction and there is no avoiding capital gains I am afraid

Thanks

Sam

Customer: replied 6 days ago.
Hi Sam, thanks for your response.So effectively, there is no scenario whereby my mother can be removed from the deeds without having a capital gains liability? Once this number has been agreed, how is it paid?Also who will come up with the true market value of the property in order that we calculate fairly. I have read about people gifting children properties under market value or a nominal figure. Is this option not available in our scenario? I feel like CGT is going to be quite high and I will end up having to pay this myself or it will come out of the share for my mother. As she won't be "cashing out" per se and her share is going to be liquid and passed to me in name, the money due on such an amount doesn't exist in cash form.Does that make sense? Please let me know if you need clarification.Thanks in advance
David
Expert:  Sam replied 6 days ago.

Hi

None I am afraid as the mere change of ownership will trigger a gain on her

Your mother would have to alert HMRC of the change of ownership and gain which would then trigger a self assessment return to be completed at the year end (so after 05/04/2019 if the transfer took place before 05/04/2019) then that self assessment return would need completing and back to HMRC by 31/01/2020 if filing online (and by 31/10/2019 if a paper style return) and the payment no later than 31/01/2020

You would have a valuation to remortgage so that would be the market value at transfer

No one can ever legally gift below value - this is tax evasion and I am a UKCustomerso do not offer advise in how to breach HMRC legislation just how to minimise tax exposure but in this case there is none as she is gifting a property that she has never lived in and whilst I fully appreciate she will not get anything like the true value of her share - that makes no difference maybe that's the fairest way to proceed, she sell you her share for market value

Thanks

Sam