Transferring property from parent

[worldlyman]

Hi guys,

My dad (a widower) has 3 properties in his name he bought years ago.

2 he owns outright - one is his main residence.

What would people say is the most tax efficient way to deal with potential inheritance and capital gains Tax in terms of transferring these to his children ?

He has another property that is in his name but he paid 1/3 of it and my sister paid 2/3 of it's original value. My sister has lived there for years. How can he transfer this to her fully to minimise potential taxes ?

My understanding is we need to get Tax advice first then go to a solicitor to draw up a will/trust - don't know if anyone knows anything about this ?

Thanks in advance.

[AdamS93]

Yes, you need to see a tax adviser.

There will be capital gains tax payable undoubtedly (unless he gifts his main residence which may or may not qualify for PPR).

All the gifts will be PETs and will suffered a charge to IHT if your dad was to die within 7 years of making the gift.

Also, if your dad still benefited from the properties (i.e. still received the rental income or still lived in the property) the gift would be caught by the gift with reservation rules.

Will have to consider SDLT also if there are mortgages outstanding.

[worldlyman]

Thank you so much for the reply.

I was wondering if we transfer the properties off his my father's name to his children who will live in his properties (so become their primary residences).

There will clearly be capital gains tax (which my dad will have to pay) and stamp duty (which children receiving the property will have pay) when these transfers happen. Could the receiving children take a mortgage out to pay the capital gains tax ? I assume the stamp duty will have to be paid in full.

I assume there will also be inheritance tax if (god forbid) my dad dies within 7 years ? My dad is 84 years old by the way.

What would people advise in terms of transferring property to minimise tax ?

[bd6759]

If they are willing to pay CGT and willing to pay SDLT, pay for proper advice and they might not have to pay either.

[worldlyman]

Hi, thanks for the reply but don't understand what you've said.

You can't avoid capital gains tax or SDLT on transfer I know that. I also assume there'll be inheritance tax but though the wise here could add some words even if it's you'll have to pay both ???

If I could pay an accountant to make me pay no Tax I'd change my name to Mr Google Starbucks !

[worldlyman]

I am not taking any advice here as a substitute for specialist advice, just useful pointers ...

[AdamS93]

It is impossible to give advise without the full picture.

Your dad will have at least £325,000 nil rate band and £100,000 to £175,000 Residence nil rate band. He may also be entitled to the proportion of unused allowance from his spouse (if he has ever had one). Therefore a possibility of £650,000 NRB and £350,000 RNRB. Meaning as long as his estate on death is less than £1m there would be no IHT due and you will get a tax free uplift for CGT tax purposes as well as no SDLT problems.

The above is based on MANY assumptions - it is just a best case scenario.