This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

BTL Declaration of Trust to Daughter: CGT and SDLT??

NickPrice
Posts:45
Joined:Fri Sep 11, 2015 12:39 am
BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby NickPrice » Sat Jul 06, 2024 12:52 am

I own a BTL. Now my daughter is an adult I want to transfer a share of it to her (25%) so that she is beneficial owner and gets part of the income. Does that lead to CGT for me? Does it lead to Stamp Duty for her?

maths
Posts:8527
Joined:Wed Aug 06, 2008 3:25 pm

Re: BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby maths » Sat Jul 06, 2024 5:14 pm

Yes, a potential CGT charge on your part. Depends upon numbers.

Daughter not caught for SDLT as you are making a gift and hence no chargeable consideration passes for her to you.

NickPrice
Posts:45
Joined:Fri Sep 11, 2015 12:39 am

Re: BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby NickPrice » Mon Jul 08, 2024 12:38 am

Thank you: most grateful. A follow-up question, if I may. My daughter will have a small rental income from this (less than half a personal allowance), but has no other income currently. At what point must she do a self-assessment?

NickPrice
Posts:45
Joined:Fri Sep 11, 2015 12:39 am

Re: BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby NickPrice » Mon Jul 08, 2024 12:54 am

Actually a second, but hypothetical question: If a parent was to gift via a trust deed not 25% in one go, but over for instance 5 tax years 5% every time to lessen CGT (in that the allowance can be used each year), would that be allowed or is it problematic?

someone
Posts:715
Joined:Mon Feb 13, 2017 10:09 am

Re: BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby someone » Mon Jul 08, 2024 8:48 am

Actually a second, but hypothetical question: If a parent was to gift via a trust deed not 25% in one go, but over for instance 5 tax years 5% every time to lessen CGT (in that the allowance can be used each year), would that be allowed or is it problematic?
Quite a long while ago I remember seeing an article saying that this would work. The caveat they gave at the time was that it was important that the individual transfers were clearly and accurately documented and executed. If there was any ambiguity then it might be successfully challenged. (as one example, the actually allocation of rental income must reflect the transfer and continuing to pay it all into the original owners sole bank account might be used to show that it was an artificial series of transfers to avoid CGT)

There have been many new anti-avoidance rules since I read that so it may no longer work - but my gut feeling is that it still should.

AGoodman
Posts:1797
Joined:Fri May 16, 2014 3:47 pm

Re: BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby AGoodman » Mon Jul 08, 2024 9:41 am

Self-assessment only kicks in when she has an actual liability to tax.

Bear in mind that some deductions may have to actually be claimed (necessitating a return) rather than just deducted for her calculations - although, unhelpfully, I can't actually think of any examples! (so you may be okay)

If her gross income is less than the PA, she should be fine.

AGoodman
Posts:1797
Joined:Fri May 16, 2014 3:47 pm

Re: BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby AGoodman » Mon Jul 08, 2024 9:45 am

Another admin point - if she does not also become a joint legal owner, you will need to register the trust with the TRS.

That isn't necessary (due to an exemption for co-ownership under Sch 3A) if she goes on the legal/registered title as well.

NickPrice
Posts:45
Joined:Fri Sep 11, 2015 12:39 am

Re: BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby NickPrice » Mon Jul 08, 2024 1:00 pm

Ok, I did my first declaration of trust in 2012 with an expert solicitor. He didn't advise to register it and that no form 17 would apply. When did HMRC introduce registration. Is it retrospective?

someone
Posts:715
Joined:Mon Feb 13, 2017 10:09 am

Re: BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby someone » Mon Jul 08, 2024 3:08 pm

I think it was 2017 - certainly after 2012. And yes, it is retrospective in that existing trusts need to be registered.

https://www.gov.uk/trusts-taxes/registering-a-trust

NickPrice
Posts:45
Joined:Fri Sep 11, 2015 12:39 am

Re: BTL Declaration of Trust to Daughter: CGT and SDLT??

Postby NickPrice » Mon Jul 08, 2024 4:19 pm

OK, thank you so much. Final question: My wife was wondering whether instead of doing a trust deed that is immediately active, as our daughter is only 18, could we say in the declaration of trust that she will be entitled to rent share only when she is 21. If yes, does the CGT need to be done at the time of execution of the deed or when her rental share is to begin?


Return to “Property Taxation”