Tax implications of buying my parent's house


Postby Theorem on Sun Mar 16, 2008 5:28 am

Some advice please. I am considering buying me parent's house. The market value of the house is approx £230k with outstanding mortgage of £145k. My mother is 65 this year and my father is 65 in 2009. I currently pay the mortgage for them. My intention is to buy the property from them at market rates using 20% of the existing equity as a deposit and the remainder of the equity being used to pay off some outstanding debts. My parents would continue to live in the property. In this way I effectively get my inheritence early when I actually need it and my parents have a home for the rest of their lives.

What are the tax implications for me from getting the money now (could be classed as a loan?) and on selling the property on my parents eventual death (likely to be 20yrs+). Some other info that might help: My wife and I jointly own our main property, she has a second home in her name. We are both higher rate tax payers. Is there any mileage in charging my parents a notional rent?

Thanks in advance for your help.
Theorem
 
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Postby Peter D on Sun Mar 16, 2008 5:58 am

If you own the house by what ever means then you will have a growing CGT Liability. It would appear that IHT is not an issue so I do not see the advantage of actually owning it. You should take professional advice before doing this to ensure that your parents are the Beneficial owners with a Lifetime Interest as this, if done properly avoids the CGT issue. Regards Peter
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Postby Theorem on Sun Mar 16, 2008 7:39 am

Thanks Peter. So although the mortgage and title would be in my name, my parent's would remain the beneficial owner? Would they not have to be seen as paying the mortgage for them to be the beneficial owners?
Theorem
 
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Postby Peter D on Sun Mar 16, 2008 8:16 am

Seek professional advise. It may be that you jointly own the property with your parents to allow the Beneficial Ownership to be valid. Regards Peter
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