Joint ownership of property in UK, one partner non-resident

[Brian]

I am non resident for tax purposes, living in Cyprus. Last year I inherited a half share in a house in the UK valued about £500K. I do not have other property in UK or Cyprus. The other beneficiary lives in UK, has two properties already in UK and is a higher rate tax payer. We are both executors and currently processing the IHT. We are considering renting the property now, in the longer term selling it. There is a possibility of developer interest in the land at a later date.
As yet we have not transferred ownership of the house. My question is about ownership and possibly will variation and how best to minimize both my and my co-beneficiary's exposure to other taxes during rental and eventual sale and future IHT.

[Nigel Lord]

Brian

Providing that 2 years have not elapsed since the deceased's death, you could use a deed of variation to transfer the whole of the proerty into your name. If you are not UK resident nor ordinarily resident during the tax year in which the property is ultimately sold you would not be liable to UK CGT on any gain. You would be liable to UK income tax on any net rental profits, but could use any unused personal allowances and lower rate bands (providing you are a UK, Irish, Commonwealth or EU national).

You could also use a deed of gift to transfer beneficial ownership between the two beneficiaries, but a deed of variation is a much more expedient solution.

This is not an exhaustive response. In view of the value of the property, I suggest that you take advice before entering into any contractual arrangements.

My firm specialises in this area of taxation and would be pleased to act on your behalf.

Nigel Lord
Lord Associates
Caxton House
Old Station Road
Loughton
Essex IG10 4PE
020 8508 1642 & 07769 931852
lordassociates@ntlworld.com

[pffitch@sayersb.co.u]

Your mother may well be resident here for Capital Gains tax purposes and therefore a gift could result in substantial capital gains. Also if your mother has been in the UK for some time she may be resident here for inheritance tax purposes and therefore the gift could be a "Potentialy Exempt Transfer"

I imagine she can't raise a mortgage on it as she is resident abroad. Has she tried raising funds in her country of residence on this property?

If she is "not ordinarily resident" in the UK she may be able to arrange her affairs so that she pays no capital gains tax or Inheritance tax. However, care should be taken if she returns to the UK to live in the new property with her family!

This is a very complicated area with many aspects to consider. Please take professional advice.

Paul Ffitch
www.sayersb.co.uk
pffitch@sayersb.co.uk

[pffitch@sayersb.co.u]

You have two years in which to vary the will by deed of variation. How this is done will depend upon how you are prepared to split the value of the Estate.
Sorry I posted the wrong answer before. try this:

You will need to consider the UK Cyprus double tax agreement in respect to any future Inheritance issues. If there is serious development potential you may like to to and shelter any gain. However, I would need to ascertain your domicile before advising.

pffitch@sayersb.co.uk