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Where Taxpayers and Advisers Meet

BUYING HOUSE FOR CHILD

YTS
Posts: 8
Joined: Sun Nov 29, 2015 10:51 pm

BUYING HOUSE FOR CHILD

Postby YTS » Sun Nov 29, 2015 10:59 pm

We have no mortgage on the house we reside in. If we take out a residential interest only mortgage against this property and buy a second property for our daughter (this house would be in her name), and initially let out property out until she gets a job (she is currently at university). Would the rental income come within her own personal tax allowance of £10k and therefore not be taxable at source assuming the rent was paid directly to her. Would it also be possible for her to pay us back the cost of the interest only mortgage. Or is there any other way the above could be done to minimise the tax burden. Thanks

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: BUYING HOUSE FOR CHILD

Postby section 44 » Mon Nov 30, 2015 12:09 pm

A couple of thoughts:

Who would be the beneficial owner of the property - you or your daughter?

Linked to the above, would you lend money to your daughter, give her the property, would she act as your nominee in respect of the property etc?

maths
Posts: 7998
Joined: Wed Aug 06, 2008 3:25 pm

Re: BUYING HOUSE FOR CHILD

Postby maths » Mon Nov 30, 2015 2:04 pm

One of the issues is whether the 3% addition to the SDLT rates will apply to your proposed purchase. It is to apply to the purchase of additional residential properties.

The question is whether this will apply to, for example, parent purchases of homes for children.

Detail will be provided by HMRC in due course.

Other things being equal your daughter should be the beneficial owner.

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: BUYING HOUSE FOR CHILD

Postby section 44 » Mon Nov 30, 2015 2:21 pm

Would it also be possible for her to pay us back the cost of the interest only mortgage.
inconsistent with her being the beneficial owner of a property that you had given her

maths
Posts: 7998
Joined: Wed Aug 06, 2008 3:25 pm

Re: BUYING HOUSE FOR CHILD

Postby maths » Mon Nov 30, 2015 2:59 pm

Parents remortgage their property.

Parents lend monies to daughter.

Daughter buys property.

Daughter repays to parents interest out of rental income.

Parents ultimately forgive repayment of principal or daughter repays it out of future sale.

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: BUYING HOUSE FOR CHILD

Postby section 44 » Mon Nov 30, 2015 3:05 pm

Parents lend monies to daughter.
I suppose that you might want to document this. Could the asset have any IHT implications?

maths
Posts: 7998
Joined: Wed Aug 06, 2008 3:25 pm

Re: BUYING HOUSE FOR CHILD

Postby maths » Mon Nov 30, 2015 3:59 pm

Could the asset have any IHT implications?
If parents lend monies and daughter buys, then "no".

If parents forgive repayment of principal then as a gift possible IHT (subject to 7 years).

No GWR issues.

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: BUYING HOUSE FOR CHILD

Postby section 44 » Mon Nov 30, 2015 5:14 pm

potentially a receivable forming part of any death estate?

maths
Posts: 7998
Joined: Wed Aug 06, 2008 3:25 pm

Re: BUYING HOUSE FOR CHILD

Postby maths » Mon Nov 30, 2015 6:14 pm

Of course.

YTS
Posts: 8
Joined: Sun Nov 29, 2015 10:51 pm

Re: BUYING HOUSE FOR CHILD

Postby YTS » Mon Nov 30, 2015 7:06 pm

Parents ultimately forgive repayment of principal - what is the meaning of this statement. What does GWR stand for? What would be the best solution to get my daughter on the property ladder to minimise tax implications?
Linked to the above, would you lend money to your daughter, give her the property, would she act as your nominee in respect of the property etc? - she would be given the property


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