Where Taxpayers and Advisers Meet

Need advice on sibling and tax implication

elderly
Posts: 2
Joined: Wed Apr 04, 2018 12:06 am

Need advice on sibling and tax implication

Postby elderly » Sun Apr 15, 2018 10:37 pm

Would be very grateful for any help.

My sister and I live in the house since purchased jointly some 25 years ago, the house is in my name although we share all expenses.

We are now aged and consider adding sister's name on the deed ( I guess as joint tenant) to ensure she will have a roof over her head if I die first. This is the only property we have, freehold, value circ £450k but need total updating, no mortgage involved, no money changes hand.

The house insurer said we may need to pay stamp duty as it is seen selling the house, if it is correct, how much would it be ? Do I have to pay IHT and CGT as well?

Would it be simpler just to make a will instead ?

Thank you for your help.

SteLacca
Posts: 342
Joined: Fri Aug 07, 2015 2:17 pm

Re: Need advice on sibling and tax implication

Postby SteLacca » Mon Apr 16, 2018 11:04 am

More information would be needed to assess the overall tax position and best course of action, but on the face of it, the disposal of what would effectively be a half share would be a disposal other than at arm's length, and would be likely to attract liabilities to CGT and SDLT.

There are likely to be planning options to help mitigate the tax consequence, but these will depend on a lot more information, and you would probably be well advised to consult a professional to discuss all options before you do anything.

Lee Young
Posts: 2634
Joined: Wed Aug 06, 2008 3:26 pm
Contact:

Re: Need advice on sibling and tax implication

Postby Lee Young » Mon Apr 16, 2018 12:05 pm

There might be an argument that you have both beneficially owned the property since its purchase, you as trustee for both of you, in which case regulating the legal ownership now is merely "sorting out the paperwork".

You should make wills as well!
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701

bd6759
Posts: 2687
Joined: Sat Feb 01, 2014 3:26 pm

Re: Need advice on sibling and tax implication

Postby bd6759 » Mon Apr 16, 2018 6:16 pm

SteLacca is not correct.

First - I agree with Lee. It is likely that there is an implied trust that your sister has effectively owned half since the start. But it would be good to formalise that at the Land Registry to prevent problems and worry should you predecease your sister.

Second - it is your home. There is NO tax to pay when you dispose of your home or a share of your home, whether at arm's length or not.

Third - SDLT is payable by the purchaser and is calculated on the consideration (money or money's worth) they have given. Since no money is changing hands, there is NO SDLT for them to pay.

elderly
Posts: 2
Joined: Wed Apr 04, 2018 12:06 am

Re: Need advice on sibling and tax implication

Postby elderly » Tue Apr 17, 2018 4:30 pm

Thank you very much for your help.

To sort out the paperwork, do we need to provide the evidence of sister owning half of the property?

I heard about the 7 year rule, would it apply to me if I l die within 7 years following the transfer ?

Thanks.

Lee Young
Posts: 2634
Joined: Wed Aug 06, 2008 3:26 pm
Contact:

Re: Need advice on sibling and tax implication

Postby Lee Young » Tue Apr 17, 2018 5:45 pm

The seven year rule will apply if you are making a gift now. If the trust has been in place for some time it may already be that the seven years has passed, and as I said above, changing the land registry title now is just making sure the paperwork catches up with the reality.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701

TaxAdviser2018
Posts: 17
Joined: Tue Apr 17, 2018 1:34 pm

Re: Need advice on sibling and tax implication

Postby TaxAdviser2018 » Thu Apr 19, 2018 12:17 pm

You should collate all the evidence supporting that you and your sister acquired the property and confirm the amount that you each paid for it, the contribution to the mortgage payments if any and capital items relating to household improvements. As a minimum, you should then execute a declaration of trust (DOT) that confirms this, that you are the legal owner holding the property on trust for you and your sister and in what proportion the property is held. You may wish to consider preparing a DOT prior to, or at the same time, as re-registering the property at Land Registry.

You may wish to consider whether to own the property as joint tenants (in which case the survivor will automatically acquire the deceased's share) or under a tenancy in common (your respective will should cover whether the property is to be gifted to the survivor or include a right of occupation clause).

SUBSCRIBE TO OUR NEWSLETTER


Return to “Inheritance Tax, IHT, Trusts & Estates, Capital Taxes”