Gift home to daughter then buy another residence

by Readers Question

15:35 PM, 12th April 2016
About 3 years ago

Gift home to daughter then buy another residence

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Gift home to daughter then buy another residence

In short, is it legal to buy another main residence then gift the previous home to your infant child who then rents that out as a Buy To Let (subject to amending the current mortgage to be a buy to let and also having the property in Trust and paying the usual taxes on income over and above what a child can legally earn).infant

Is that a) legal and b) a way of moving to another property but keeping the original house without paying the additional 3% SDLT on the purchase of the new property?

Please don’t shoot me down if this is evasion/avoidance, etc. I’m so above board it’s crazy but I just wondered whether the above scenario would work and as gifting is technically disposing then I think HMRC would be okay with it.

In the end I want to move house but keep my current house as a rental investment and as I’m moving into the new one I’d rather not have to pay this silly increase in SDLT as it WILL be my only home.

Any help/advice will be appreciated 🙂

Thank you

Pip



Comments

Neil Patterson

15:41 PM, 12th April 2016
About 3 years ago

Hi Pip,
A minor cannot own property in the UK so it would have to be in trust. Therefore I don't think this would be acceptable to HMRC.

However please see the article New Tax Strategy For Accidental Landlords >> http://www.property118.com/new-strategy-for-accidental-landlords/86089/

Ern Collison

10:24 AM, 13th April 2016
About 3 years ago

Gifting only works if you hand it over completely and have absolutely no benefit from it. HMRC will not accept the situation you have proposed as they will claim you will be benefitting from the incoming payments, or you are still involved in its management somehow.

Sunny K

12:38 PM, 13th April 2016
About 3 years ago

Interesting strategy. I think it would work if you could find an adult to gift the property and reduce your mortgage to zero.
The transfer of property as gift has no SDLT as per https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property.
You have than disposed you main residence and can buy a new one without additional SDLT. The gift recipient can than transfer back the property to you.

Puzzler

15:26 PM, 15th April 2016
About 3 years ago

I think you'll find that like CGT the market value would apply so the SDLT would still be payable. This is so convoluted they would be sure to smell a rat, and it certainly looks like aggressive avoidance to me at best. What do you mean it will be your only home? from what you describe you will have two...

Just budget for the tax, stamp duty was already reduced significantly for certain bands in any case last year, this is an increase following a decrease, of course depending what band you're looking to buy in

Charlotte Walker

8:52 AM, 16th April 2016
About 3 years ago

My son has a property in a bare trust which works really well as it uses his tax allowance and covers his school fees, I manage the trust and roll the property management in with my own. BUT it all depends on the property and finances at the time. My sons property was left to him with no mortgage as a trust cannot get one, the fact that it was a legacy, we paid some tax on it (don't remember if it was cgt or stamp duty). Also, the property becomes his at 18 which is plenty young enough to lose every penny! I suggest getting some expert advice, most accountants do a free half hour session. My gut says that if this was a loophole, we would all be doing it!

Puzzler

18:39 PM, 16th April 2016
About 3 years ago

The only tax (I think) that would apply is inheritance tax if the estate was over the threshold. That would depend on the date of death of whoever left it to him. It would apply to the whole estate if there were other assets not just the property.

I also manage an inheritance and no tax was payable.

Charlotte Walker

20:26 PM, 16th April 2016
About 3 years ago

Reply to the comment left by "Puzzler " at "16/04/2016 - 18:39":

I am sure you are right there, it was a few years back.


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