Living in parants house - CGT?

[Williz]

3 years ago my father took out a mortgage on a second home which my sister then lived in.
2 years latter she moved away and i moved in, i have now been the for a year.
I would like now to become the sole owner of the property which my father agrees with.

How can i do this?

Will i be liable to pay CGT if i then decided to sell the property in the future?

Any advice will be most appreciated.

[Nigel Lord]

Williz

Your family has fallen into a common tax trap. As your father owns the property but does not live there, any capital gain would be taxable (he is not entitled to Principal Private Residence (PPR) Relief).

Furthermore, if the property was gifted (or sold) to you, your father would be treated as transferring it at open market value and would be taxed accordingly (because you are connected persons). You would be deemed to have acquired the property at open market giving a higher base cost. This would not help you as you would qualify for 100% PPR Relief (while living in the property as your main residence).

Fortunately, a solution does exist. By using a trust arrangement with yourself as a beneficiary, it would be possible to (indirectly) transfer the asset to you and for the trust to qualify for PPR Relief.

There would be professional costs in setting up this arrangement. Please contact me if you are interested in implementing the strategy.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk