2nd home purchase within the familly

[barry.sangster@amec.]

I am thinking of purchasing a property for my daughter and 5 year old grandaughter to live in as their permanent residence. I would fund this purchase from capital(which is held in my wifes name) and a small mortgage. I do not want my daughter to own the property until she inherits it on death of my wife or I. We own our property outright and I also have a son who will inherit his 50% share of our assets on our death. I am a high rate tax payer.

My daughter will co habit or get married at sometime in the near future and when this happens a nominal rent will be paid to my wife and I. My wife works at present but could give up her job if it is tax effient. I would appreciate any advise about tax liability applied to any rental income, capital gains and the best way to set this up.

[jbaileycta@btopenwor]

Barry

I would need quite a lot more information to give definitive advice, but the bare bones are:

If the house is bought in your and/or your wife's name, there will be a chargeable capital gain when it is sold, but if you set up a trust to buy the property, then it should be possible to arrange matters so that this capital gain will be exempt from CGT.

As for the rent, you (or the trustees if you use a trust) can deduct mortgage interest paid and certain other expenses. If there is a surplus after these deductions, it will be liable to income tax.

This is only an outline - do take professional advice before you do anything. If you would like my assistance on a professional basis, please contact me.
James Bailey, Chartered Tax Adviser
jbaileycta@btopenworld.com