land transfer & paying for it!

by **letum** on Mon Mar 14, 2011 10:33 pm

Complicated question I think, Not sure if anyone can help, but any advice would be very much appreciated.

My parents are splitting their land up which is approx 1 acre into 3 or 4 plots. I would like to build onto one of the plots which my parents have very kindly offered at a discounted price. Although we have some savings we do not have enough to start a selfbuild mortgage. My parents have offered to gift me the land and sign it over to me on the understanding we pay them on completion or as soon as possible.
My question is if my parents gift me a plot of land worth between 60 & 80K can I gift them £60K at a later date or will there be any taxes or similar on that money.
I believe in order to obtain a mortgage I need the land to appear to be a free gift so I can not state that this is being paid for at a later date!

I hope this makes sense but putting it simply can I give my parents £60K as a gift without myself or parents paying any taxes ie capital gains tax?

Thanks for any help.

by **mullet** on Mon Mar 14, 2011 11:47 pm

This sounds like deferred payment (i.e. effectively a loan) rather than a gift of land followed by a gift of money. Your parents will be exposed to CGT on their disposal of the plots, although to a great extent that depends on the nature and use of the land during their period of ownership. On acquiring the land, building on it and then retaining it you are not exposed to CGT.

by **letum** on Mon Mar 14, 2011 11:53 pm

I understood that due to the land being part of their garden and less than 1.5hectars they would not be liable for cgt?
I also understand that i do not wish for it to be a loan eventhough this is technically what it is.

I am really after knowing if i gift my parents £60k in a years time would they get to keep the entire 60k or would they have to pay some kind of tax?

Thanks for your help

by **mullet** on Tue Mar 15, 2011 12:12 am

I understood that due to the land being part of their garden and less than 1.5hectars they would not be liable for cgt?

I was waiting for you to say that ... I didn't want to "lead the witness". If this is the garden/grounds of a house which has always been their only or main residence and the total area is 0.5Ha (1.24 acres) or less, then yes the disposal will be free of CGT. But it must still be garden/grounds at the date of disposal. If work has already started then relief will not be due.

Call it what you like, but if your parents "gift" you some land with the expectation of receiving a "gift" of money some time later to effectively pay for the "gift" then it isn't a gift. But there is no income tax on gifts anyway, and the only potential tax is inheritance tax if (a) the value of the estate is high enough and (b) one of the "donors" does not live for 7 years after the "gift". But I still don't think that we are dealing with gifts here.