Partial gift of property to tenant who is also my son?
1:34 PM, 27th October 2016, 9 years ago
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One of my tenanted properties is occupied by my son and his wife. The property is conservatively valued at £250,000. He would like to buy it from my wife and me, but can get a mortgage for only £100,000. We are thinking of gifting the remaining £150,000 to them.
How should we structure the ‘sale’ of the £100,000 equity and gift of £150,000. I can’t give him £150,000 cash as a deposit.
He is a first time buyer.
Will there be SDLT to pay on the whole £250,000?
Many thanks
Malcolm
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Lending Into Retirement - Don't assume age is a barrier
Member Since January 2016 - Comments: 32
1:17 AM, 28th October 2016, About 9 years ago
I’m not a Tax expert !!!!!
I am presuming that the property is not mortgaged at the moment – But I believe if you gifted both of them a half share each – i.e. £124, 999 each (and you survived them for at least 7 years) there should not be any Stamp Duty liability or Inheritance Tax and then they could arrange a mortgage or re-mortgage for the £100K to pay you back later – A lot of trust involved – BUT this can be solved by arranging a deed to trust to be drawn up – if you do go down that route I would further advise that you the deed of Trust covers the Spouses share – Just in case the marriage breaks down at some point ??? & also check out if there would be any CGT liability & it might be worth-while looking at specialist gifted deposit mortgages.
http://www.ns-fs.co.uk/GIFTED-DEPOSIT-MORTGAGES..html
Member Since July 2013 - Comments: 19
11:07 AM, 28th October 2016, About 9 years ago
Thanks Sunita. Yes, the property is unencumbered.
Member Since April 2016 - Comments: 49
12:48 PM, 28th October 2016, About 9 years ago
Hi – you can “gift” the £150K value but their solicitor is likely to ask for an indemnity policy – cost about £180 – (they say as protection in case you subsequently declare as a bankrupt or similarly financially ‘distressed’) and this is quite common; and HMRC will want to know of the gift for the 7yr rule mentioned previously – but that shouldn’t be a problem and shouldn’t put you off. The transaction moves forward on the basis of ‘sale of £100K’ so there’s no stamp duty payable. You will get clobbered for capital gains though based on the actual value of the property (£250K, less your purchase/sale costs), there’s no way out of that one – I know as I did similar thing last year just after the stamp duty (SDLT) was changed, so whilst my son had gained on SDLT, I still had to pay CGT on the whole gain of property value and not what I transferred it for.
I don’t know about the “Deed to Trust” mentioned above so can’t comment. I hope this helps. Your solicitor should be able to guide you through the whole process.
Member Since January 2011 - Comments: 12209 - Articles: 1405
10:08 PM, 28th October 2016, About 9 years ago
She’s second post is very well thought out, I agree with all points she has raised and in particular the point about CGT. Please check that out as your first priority as it could be a deal breaker for you, or if not a very nasty shock at some point in the future.
If your son needs a mortgage the gifted deposit element will restrict the lenders available to him quite significantly. In this regards I would recommend you to contact three of the mortgage brokers who regularly comment of this forum; Howard Reuben, John Constant and Mark Alefounder. If you go to Aite Navigation, them Member Directory, then enter each name individually you will find their member profiles. They all have a contact form on those profile pages.
Good luck and please report back on progress.
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