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Where Taxpayers and Advisers Meet

Selling property to a friend BMV

arjunb88
Posts:15
Joined:Thu Mar 02, 2017 6:55 pm
Selling property to a friend BMV

Postby arjunb88 » Thu Mar 02, 2017 7:00 pm

I am selling my only property to a friend. I have no bankruptcy issues or loans outstanding and therefore no charges. The property is owned outright.

It is valued at around 380,000 and I will sell to my friend for 250,000 as I am sadly dying and I would like to help.

They are buying with a mortgage. I understand this is a Below market value sale, they are intending on raising mortgage and using a deposit from their savings in a 90/10 fashion.

Is this a concessionarry sale? As I understand it is not deemed concessiomarry as the purchaser is utilising their deposit funds as well.

are there tax implications.

failing that, I can sell to my grandson and friend as joint purchasers, but then as I understand it will be subject to IHT if i do not survive 7 years.
so would that then mean the devalued number of 130,000 is subject to IHT or would it be half of that value of 65,000 as one is a familial "gift" but the other owner is not family?

Please advise

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Selling property to a friend BMV

Postby maths » Fri Mar 03, 2017 6:08 pm

I assume you do not, and have not, ever lived in the property.

In which case a sale at below market value triggers a CGT charge on any gain but the gain is based on market value not the price you sell at.

The difference between market value and price paid is treated as a gift on your part for IHT purposes with a potential IHT charge (subject to the availability of any nil rate band (£325K)) in the event of death within 7 years.

You could leave the property to your grandson in your will who would inherit at its then market value who could then sell to your friend with no CGT consequences.

arjunb88
Posts:15
Joined:Thu Mar 02, 2017 6:55 pm

Re: Selling property to a friend BMV

Postby arjunb88 » Fri Mar 03, 2017 7:30 pm

Hello yes I have lived in the property for 30+ years and no longer do. Would this still count as a gift and revert to IHT as i am selling out of the family and essentially to an on the market purchaser?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Selling property to a friend BMV

Postby maths » Fri Mar 03, 2017 9:10 pm

As you have lived in the property there would probably not be any CGT charge (even if sold at below market value).

If you sell the property at below market value whilst alive but continue to live in it the gift element (ie difference between market value and actual sale value) would be a gift with reservation for IHT purposes and hence remains part of your estate on death.

Gift element = 380k - 250k ie 130k which represents 34% of market value.
Thus on death, 34% of market value included as part of your estate (which is not a problem as would fall in nil rate band of 325k unless you have other valuable assets).

arjunb88
Posts:15
Joined:Thu Mar 02, 2017 6:55 pm

Re: Selling property to a friend BMV

Postby arjunb88 » Fri Mar 03, 2017 9:40 pm

Thank you. If however I sell at below market value but do not remain in the property . I will be selling to my friend and not living in the property.

Does the 34% still go back to my estate for iht purposes?

Does this make a difference to banding if my wife passed away 2 years ago?

arjunb88
Posts:15
Joined:Thu Mar 02, 2017 6:55 pm

Re: Selling property to a friend BMV

Postby arjunb88 » Fri Mar 03, 2017 9:44 pm

Would my friend be liable for the reversion back to iht or would the tax owed be taken from whatever is left in my estate. Cash from house sale + around 300k in the bank?

arjunb88
Posts:15
Joined:Thu Mar 02, 2017 6:55 pm

Re: Selling property to a friend BMV

Postby arjunb88 » Tue Mar 07, 2017 2:36 pm

Anyone?

AnthonyR
Posts:322
Joined:Wed Feb 08, 2017 2:33 pm

Re: Selling property to a friend BMV

Postby AnthonyR » Tue Mar 07, 2017 4:10 pm

The discount (amount below market value) would effectively be treated as a gift by you to your friend. Assuming you do not retain any benefit (ie don't live there or get any rent) you need to survive 7 years in order for the gift to be outside of your estate.

If you were to die within 7 years the £130k will use up part of your nil rate band on death (ignoring annual exemptions for simplicity), but will not result in any tax for your friend as it will all be within your nil rate band (assuming you haven't made any other gifts in the past 7 years).

This will mean that the remainder of your estate will suffer higher tax overall as you will only have £195k of nil rate band remaining (plus any residence nil rate band that might apply if you leave your home to your children/grandchildren) but it will be payable from the estate, rather than by your friend. If your wife passed all her assets to you on death then you will benefit from her nil rate band (and residence nil rate band if applicable) as well, adding a further £325k to the available exemptions.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk


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