Private sale swap with BTL buyback?

by Readers Question

11:33 AM, 27th January 2021
About a month ago

Private sale swap with BTL buyback?

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Private sale swap with BTL buyback?

I think the initial part of this plan sounds like a relatively straight forward proposition, but the second buyback part probably not… so, I hope the good people of P118 can point me in the right direction!

I’m living in a property that still has a mortgage, but with a sizeable chunk of equity in it. My mother (who is semi-retired) has a larger property with a large chunk of equity in it too. This will attract stamp duty but mine will not. Both properties are in Scotland.

My wife and I would like to buy my mother’s house at market value on a concessionary purchase mortgage where she gifts the equity to us. She would like to buy my smaller property – directly from me – on a similar concessionary purchase mortgage where my equity is gifted to her.

But… in two years time – after her mortgage deal has expired – I want to buy back the house from her on a new BTL concessionary purchase mortgage, then let the property to her but within a connected tenant framework – I would claim no profit or loss on the property.

I’m aware of the second home tax on the repurchase as I have another three BTL properties – these are not incorporated.

Q1: Is it correct to assume that the initial private vice versa residential sale wouldn’t attract the second home tax?

Q2: Is the connected tenant proposition totally legal directly after I buy back the property from my mother?

Q3: could there be any unforeseen IHT issues if my mother is taken into care further down the line?

I look forward to hearing your comments and thank you for providing such a fantastic resource for so many years!

William

Comments

Puzzler

9:10 AM, 28th January 2021
About a month ago

Why do you want to buy back your home from your mother after the two years? Why not keep it now?

Yes the second home tax will be payable by you but not your mother, why would it not be? Once upon a time a swap did not attract stamp duty but this loophole was closed long ago

Care does not affect IHT but I think you mean assessment for care costs. It will make no difference as she will be assessed as if she still owns her home or has the proceeds


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