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Where Taxpayers and Advisers Meet

Second Family Property - CGT

Chris1012
Posts:2
Joined:Thu Feb 02, 2017 9:42 pm
Second Family Property - CGT

Postby Chris1012 » Mon Feb 13, 2017 9:56 pm

During 2009 I wanted to acquire a property and as I was contracting through jobs I was unable to secure a mortgage, so my father bought a house in his name.
This house is his secondary house which he has never lived in.

Since 2009 the house that he bought for me is now freehold and the value has nearly trebled.
Apart of the increase in value was due to a refurb job on the whole house which I had done in 2012.

I own no other house and have lived in this house since 2009.

I now want to borrow against the the property to carry out some more works that will cost around 100k-140k.

The particular source of borrowing the money requires me to be an owner of the property.

My understanding is if I get my father to add me as a joint owner or the main owner on the deeds, I will be liable for inheritance tax if my father passed away within 7 years and he would have to pay capital gains tax at the point of change on the deeds.
No Stamp Duty would apply as it would be like he is gifting me this property. Is this correct?

If so, is there anyway round this?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Second Family Property - CGT

Postby maths » Tue Feb 14, 2017 6:00 pm

Your father appears to be the sole legal owner of the property. In the absence of any other documentation he will also be the 100% beneficial owner.

In this case you could be added to the legal title without precipitating any tax consequences. This would assume that father continued to be the 100% beneficial owner.

You then would be joint borrowers were a mortgage to be taken out.

On any future sale of the property CGT would be payable by father; no relief available as the property has never been father's sole or main residence.

Other things being equal father could have initially bought the property and then under a declaration of trust transferred 100% (99% or whatever) of the beneficial interest to you (possible IHT might have arisen if death had occurred within 7 years which didn't in the event happen, but no CGT); assume father bought without a mortgage.

No SDLT if a gift is involved (unless gift involves donee taking on part of the mortgage).


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