Gifting Property to Children

[A4Aldo]

Me (62) and my wife (59)are selling our house for £200k and buying a 2 bed flat for £86k. We will live there in the short term.
I want to put the new property in my daughters' names at the outset. Are there any tax/other implications?
The second part of the plan is to buy a property in Spain and live there permanently, renting out the UK property to provide income. Again any thoughts or comments would be greatly appreciated.

[Peter D]

If the flat is actually your daughters then she will incure the CGT when and if the property is sold. Your daughter may also become laible for Income tax on the perceived rentable value of the property even if there is no actual payment. How long do you intend to stay in the UK. If it is her flat the income should go to her and she will pay Incame tax on that offset by maintenance, running costs etc. When you goto Spain it sounds like you are expecting an income form a property you do not own, where you expecting this to be tax free or taxed her or in Spain. Your question would appear simple but the ramifications are not. In the longer term you have to consider IHT. Regards Peter

[kirstie.williamson@a]

There are lots of issues here and you need both legal and taxation advice in the UK and Spain to ensure you get things right.
If the property in the UK is in your daughters' names then you cannot receive the income stream from it - it will belong to your daughters and they will have to pay UK tax on the income. They will also be liable to UK CGT when the property is sold. By giving the property to them you have made a gift for UK IHT purposes. If you continue to live in the property after gifting it to them then you have made a gift with reservation and the property will remain in your estate until you move out. Then you will have to live for 7 years for the property to fall outside your estate completely.

If you decide to keep the UK flat in your own names the you will have to pay UK tax on the rental income and also declare the income in Spain. You should get a credit for the UK tax paid against the Spanish liability.

You will need to consider inheritance tax planning in both the UK and Spain. You may require wills in both jurisidictions.

You may consider owning the UK property jointly with your daughters in which case there is a certain amount of planning which can be done.

You really need specilaist specific advice on all these areas.

KW

[A4Aldo]

Many thanks. That's given me a lot to think about!